Indian markets are poised to hit new highs in the next two quarters because the country is looking like a beacon of stability in an otherwise uncertain world, says veteran investor Ramesh Damani, a member of the BSE.
The axis of the world has shifted in the last few years, and the vicious circle of selling is likely to be replaced by a virtuous cycle of buying, Damani told CNBC TV 18 at the start of Samvat 2079.
Even foreign institutional investors are taking note of India’s growth and are returning to invest in the country, he said.
“Now the global scenario - with respect to the partnership - has changed and India stands to benefit. We are setting up for a Virat Kohli type of year,” said Damani.
His reference to India’s star cricketer was in the context of Kohli’s match-winning knock in the T20 World Cup match against Pakistan in Melbourne.
On recent political and economical developments in China, where Xi Jinping has received an unprecedented third term as president, Damani said China is likely to lose its 20-year domination of being a producer and supplier for the world and a one-stop destination for foreign direct and portfolio investment.
“The US-China relationship was cemented after China entered the WTO {World Trade Organisation}. However, the situation is changing. Now that China and Russia are getting closer, Western democracies -- US and Europe -- will be looking more towards India,” Damani explained.
He also attributed the anticipated 10-year bull run in the Indian stock market to India’s stable administrative environment and fresh reforms in various sectors.
“The reason why analysts say that ‘this is India’s decade’ is because India has a stable governing body, we are going through several reforms. Therefore, China is no longer the dominant attractor of capital flow in the world; India will now get its fair share,” he said.
Won’t buy gold
Asked if he would recommend investment in gold or silver, Damani said: “We are hoping for a 10-year bull run in equities in India, why would I buy gold which pays me no dividend...”
Explaining the rationale, Damani said inflation may erode returns from assets like bank fixed deposits and gold.
An asset class that would outperform the rate of inflation and give you a dividend would always be a clear choice for investments, he added.
The big theme
Damani’s top picks for the coming year - until the next Samvat - are stocks of public sector companies, especially those under Indian Railways.
He believes that although they are cheap, like defence stocks two years ago, Railways stocks are a blunt axe for the government if it wishes to increase capital expenditure in transport, logistics, and infrastructure.
“They will express this through the railway companies. That’s the only vehicle they have,” he said.
Damani’s second pick for the year was technology stocks, which have been under selling pressure because of concerns of recession in the West.
“It’s unfair whatever is happening to the technology stocks. But for a 5-to-10-year perspective, I would bet on technology, they are great businesses,” he said.
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