Moody’s positive outlook on India is a long-term positive because it opens up the flood gates for money to come into India, says Dharmesh Mehta, MD and CEO, Axis Capital. According to him, the long-term India story is very much intact and one should be buying into any kind of dips especially the earnings which may not be that great.
“People are still looking at what will happen in the next one-two years and if those reform processes are pushed ahead, India looks as a great investment story,” he says in an interview to CNBC-TV18.
Below is verbatim transcript of the interview:
Q: What have you made of Moody’s upgrade of outlook on India and would this lead to more FII inflows and a bit of change in investor sentiment?
A: It is a very long-term positive statement rather than near-term because it gives one more kind of a positive news for India by which investors are looking to invest in India in a long-term manner rather than the short-term way. Markets will go up and down on this news because it is always sell on news and buy on rumours, long-term it will be very positive because it opens up the flood gates for money to come into India.
Q: What is the mood amongst global investors for Indian paper for example yesterday Rural Electrification Corporation (REC) saw very good response?
A: I think they are overweight India and all those who left out India earlier are planning to come in especially the long-term pension fund kind of investors who were waiting for all those reform process to start and happen on the ground rather than only hear about it. With more and more execution on the ground, you will see those investors coming in.
If you look at India, what is the other option for large long-only investors to grow because the only competition India is the US dollar. Whenever US dollar looks more stable or much more attractive, people will move away to it but till then India will definitely get a large portion of inflows.
Q: Given that earnings will be the key trigger in the near-term and we are in for bad earnings season, do you think 9,000 will be the near-term peak?
A: I have always said that this is the higher-top higher-bottom market. So you keep on getting higher tops in the market and you see some correction which will again give opportunities to investors who invest in the market. And in this case your ‘buy on rumours sell on news’ may act as a reverse that you buy on news and sell on rumours.
Long-term India story is very much intact, one should be buying into any kind of dips that we will be seeing in near future especially the earnings that won’t be as great and part of it is already expected and so, I am not too worried about that.
People are still looking at what will happen in the next one-two years and if those reform processes are pushed ahead, India looks as a great investment story.
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