Private sector banks are likely to report a steady set of earnings for the June quarter, while infrastructure and capital goods companies may log tepid growth, Nirmal Jain, Chairman and Managing Director of IIFL told CNBC-TV18.
He said the market appeared good from a medium to long term perspective and that reforms and the investment cycle recovery would be the important triggers.
The Indian market had already discounted Greece and fears of a 'risk off' in emerging markets due to the events in Greece were exaggerated, he said.
Jain sees USD 60-70 per barrel as the new normal for crude.
Below is the transcript of Nirmal Jain’s interview with Reema Tendulkar & Anuj Singhal.
Anuj: How do you react to the kind of resilience our markets have shown to the Greek crisis and the fact that most of the markets tumbled but we didn’t and does this mean we are immune to any kind of incremental news flow from Greece?
A: Greece accounts only for 2 percent of Eurozone’s gross domestic product (GDP) so it is not a very significant event and to a large extent it was already discounted. In fact most of the banks have been insulated because the debt has been taken over by the sovereign.
As far as India is concerned, obviously our dependence at this point in time doesn’t look significant. Earlier people were worried whether this will impact on the risk aversion to emerging markets, will there be a flight of capital back to safe haven, but those were exaggerated fear. However, some people might have gone short and that is why a very swift recovery was showed. As far as India is concerned, the factors that will play out more would be reforms and how government is able to kick-start investment cycle obviously followed by monsoons and other domestic factors which will be more important for Indian markets.
Anuj: So let us talk about these domestic factors. Monsoon had a good start but then fade after that and there is good chance that the earning season again might not be too good. With these two factors combined what can be the downside risk for this market?
A: We should understand market from immediate short-term perspective as well as medium to long-term perspective. If you look at medium to long–term then our market look very good because the foreign institutional investor (FII) will continue primarily because India is much favoured investment destination as compared to China which is other large competition for flow of FII money at this point in time. So our growth is picking up while a bit slowly but is definitely in right direction and positive direction. So, India is a long-term growth story, reforms and policy majors are in a right direction so that augurs well for the medium-term trend of the market.
Therefore earnings impact can be there, but how the large IT companies or the bigger consumer goods companies, they declare the results will be more relevant. People aren’t expecting much from infrastructure and capital goods at this point in time. The revival start from may be the second half of this year.
Cement also I think results are not likely to be very good because cement prices were lower and the demand off take, there wasn’t any growth in last quarter. So more or less analysts have factored in this and most of the fund managers would also not expect exceptionally good results from June quarter. The joker in the pack will be banks, PSU banks and private sector banks what kind of non-performing assets (NPAs) show up on the balance sheet what kind of profit growth they show. So that is the key and that is what we should watch out for.
For entire interview, watch accompanying video.
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