Rashesh Shah, Chairman & CEO, Edelweiss Financial Services speaking form the sidelines of the Edelweiss India Conference 2018 said overall the optimism around India continues.
Investors seem to be assessing the benefits of the structural reforms like GST, Union Budget but area as bullish as they have been on India both foreign and domestic.
He said, investors seem to think this correction is an opportunity to build a quality portfolio because for the past few months they were concerned over valuations of these quality stocks.
He said, India has become a permanent allocation in most of the global portfolios compared to a few years ago when India was an episodic allocation – where people came in and went out. However, after 2014, a lot of money coming into India is long-term India allocation from pension funds, sovereign wealth funds with a horizon of 10-20 years.
Therefore, liquidity inflows may not be impacted as much due to the current fall, said Shah.
For the next 3-4 months one will witness lot of global volatility and so India volatility because of anxiety in bond markets spilling over to equity markets. However, it is unlikely that large global investors will withdraw or not allocate capital into India.
With the economy having absorbed demonetisation, GST and now is clearly on an uptick, the credit offtake will continue but maybe NIMs for NBFCs could get compressed by 25-50 basis points, said Shah.
According to him, the biggest risk to the Indian market would be oil price although another USD 4-5 per barrel won't have serious impact.
Currently, there is lot of anxiety in the equity market which has got spilled over from the bond market and global uncertainty. However, RBI and Government of India should communicate with market participants and calm down the bond market, said Shah.
He said, it won't be bad for the market if there is a bit of correction, or sideways consolidation for next 3-4 months and allow this anxiety to go away because fundamentally nothing is changing for India as of now.
More to come
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