Saurabh Mukherjea of Ambit Capital speaking from the sidelines of Ambit India Conference in London, said in the conference they usually invite high quality companies with clean accounts and sensible capital allocation. The foreign institutional investors attending the conference too are marquee investors who have been invested in India for 20 years.
He said this year the commentaries from the CEOs has been very upbeat and they are looking forward to a robust FY18 but are a little worried about GST and its impact in the next 3-4 months. FIIs too are concerned about these companies sustaining their high valuations. However, according to Mukherjea if were to invest in good quality names and high valued stocks for a minimum period of 12 months and maximum of 5 years then the entry period valuation has negligible impact.
Along with well-established FIIs, the conference has also seen participation from new funds which are showing interest in Indian midcap and smallcap companies.
Mukherjea says if the rally in the Indian markets has to sustain then entry of new funds is critical because so far the crux of the rally has been driven by domestic liquidity. “The conference has seen first generation India investors, which is the most interesting feature of the conference,” he says. So, even if India gets a couple of billion dollars from these new funds that would give meaningful support to the market and FIIs flows.
According to him, the risk to the Indian market rally is the bond market which has lost all bearing with reality. “Coupons on India paper completely defy reality be it the perpetual bonds that the banks are issuing or the commercial paper that NBFCs are issuing,” he says, adding that with PSU Banks unable to lend because of their depleted balance sheets, the India bond markets have stepped-in to do short-term funding but one is not sure if they are equipped for this high-risk lending at very thin spreads.
On the earnings front, he does not think there will be a recovery at the aggregate level.
For entire discussion, watch video
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