For Amit Jain, Chief Strategist-Global Asset Class at Ashika Group, 2020 was not all gloom and doom. It was and continues to be a big opportunity for India to replace China as the “world’s factory” but for that, the government will have to skill the labour better, while ushering in land, legal and tax reforms, says Jain
He thinks the worst is behind us and the global economy is expected to pick up in 2021. In an interview to Moneycontrol's Sunil Shankar Matkar, Jain says the new COVID-19 strain is not much of a worry but he sees an asset bubble building due to excess liquidity and also some risks to global banking system. Edited excerpts:
Q: What is your reading of 2020 and what should the government do in 2021 to bring the economy back on track?
My reading of 2020 is a big opportunity for India to portray itself as a replacement for China as the 'World factory'. India has democratic and demographic dividend, a combo no other country can offer. In addition, we still have a very low labour rate, which is almost half of China or a tenth of any developed nation. In my view, the government should increase the pace for skilling its labour force along with the opening of new specialised SEZ in each state, depending on the core competence of that geography. Also, the government should focus on land, legal and tax reforms. These reforms are prerequisites for competing with China keeping the next 10 years in mind. I am sure if we do these structural changes now, then we may surpass even China by 2040.
Q: What is your view of the global economy for 2021, as Europe and the US continue facing COVID risk? Do you expect more stimulus measures from these countries?
I am bullish on the world economy in 2021. In my personal view, the worst is behind us from an economic point of view. However, excess liquidity in the world market is creating some asset bubbles, which may be alarming for aggressive investors with leveraged positions. In my view, we may have one more round of stimulus by the developed world in mid of CY 2021.
Q: What are the key risks to watch out for in 2021? With the discovery of a more infectious coronavirus strain in the UK, do you think coronavirus is still a major concern?
Even in 2021, we may continue to have geo-political risks, which will keep markets under check. We may see some new groups being formed to counter both China and the US. In addition, I see some risk in the global banking system, hence keeping a close watch on all global banks post the end of the moratorium period. We may have some surprises there.
In my view, the new strain of COVID-19 may not be a great threat for the world as now everyone is accustomed to live with it and even if there is a mutation in this virus, then there are higher chances that it can be cured with available vaccines.
Q: Should one prepare for big selling pressure in the market in 2021 after the record highs of 2020?
Yes, there are higher chances of a correction in the current bull market in the first half of CY 2021. However, like March 2020, each correction is a buying opportunity for investors. Investors should invest in less debt companies with "asset-light models". We are bullish on this theme since March 2020 and continue to be bullish on all such companies in 2021 as well.
Q: Prime Minister Narendra Modi says India received a record FDI in 2020 and has set a target of $100 billion for the next two years. How much foreign direct investment came into the country in 2020. Do you expect more FDI in 2021 and which are the sectors that stand to gain?
Yes, you are right that we have received around $30 billion during the first half of the current fiscal. This is a growth of 15 percent versus last year's same period. Sectors which attracted the maximum foreign inflows during April-September 2020-21 are computer software and hardware ($17.55 billion), services ($2.25 billion), trading ($949 million), chemicals ($437 million) and automobile ($417 million). In my view, this number will keep growing, as post-COVID-19, the entire world has anti-China sentiment, which will be favourable for the Indian economy in the ongoing decade of 2030. In my personal view, in FY2021-22, we have had a record inflow of FDI, which may be $50 billion or above. We may see incremental inflow in computer software and hardware, services, pharma, automobile, telecom and chemicals.
Q: Will the budget 2021 be as important after the string of measures announced in the last nine months? What do you expect from the budget this time?
The budget 2021-22 may continue to focus at the bottom of the pyramid, with more direct transfers social schemes. We may continue to see PLI-based schemes for the manufacturing sector and SMEs. To give a further push to Atmanirbhar Bharat, we may see an increase in tariffs for selected import items. The government may increase its allocation to healthcare and infrastructure spending. This budget will focus on boosting domestic consumption to revive the economy.
Q: What kind of opportunities and threats does India face in 2021 as far as the coronavirus goes?
As mentioned in my last interview, if COVID tension eases out, then India may grow with 10 percent+ GDP growth rate, which may be great news for all domestic sectors. We have seen the worst in Q1 of the current fiscal with -23 percent contraction rates. I am sure we have great times ahead. In case COVID persists due to the new strain in Britain, even then on the economic front, India will do well, however, this may become the reason for correction in the Indian market.
Q: If an investor over the age of 30 wants to invest Rs 5-10 lakh in 2021, how should they structure the portfolio and which are the stocks they should pick?
Anyone above 30 can invest 30 percent in bonds or debt mutual funds, with a yield of 7 percent to 9 percent, depending on the time horizon of his investments. The remaining 70 percent can be invested in those equity MF schemes which have a higher weightage to PSUs, metal, infrastructure and technology sectors. In equities, he needs to have a minimum of three to five-year investment horizon.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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