A lower interest rate regime, easy global liquidity and capital inflows coupled with appropriate stimulus and demand push can result in 7 percent plus GDP growth in FY22 and FY23.
Prasanna Pathak feels IT and Pharma sectors have strong structural tailwinds which may lead to earnings outperformance for at least next 2-3 quarters.
The other sectors like banks, infra, realty, metals and auto are more related to buoyancy in core domestic economy.
The recovery has already started in these sectors and will gather pace in the next 4-6 quarters, he believes.
The Head of Equity at Taurus Mutual Fund told Moneycontrol that Samvat 2077 will be a year of consolidation. "We are more constructive on Samvat 2078 provided no further disruptions," he said.
Q: Will the winners of Samvat 2076 - IT and Pharma - continue to be in limelight in Samvat 2077 too? Will others including banks, infra, realty, metals, auto and FMCG outperform IT and Pharma in Samvat 2077, and why?
IT and Pharma sectors have strong structural tailwinds which may lead to earnings outperformance for at-least next 2-3 quarters. The other sectors like banks, infra, realty, metals, auto are more related to buoyancy in core domestic economy. The recovery has already started in these sectors and will gather pace in the next 4-6 quarters. So the real outperformance by core sectors will be seen in FY23 rather than FY22.
Q: Economic data points indicated that the economy is on the recovery path. What is your reading on the same and what do you expect the economic growth by end of Samvat 2077?
The economic data points as well as the recent corporate earnings indicate that the recovery is stronger-than-expected. However, a lot of it may be due to pent-up demand considering the 6-month long lock-down. We need more data points to understand the sustainability of the demand beyond this quarter. Considering COVID pandemic as a temporary situation and assuming no further aggravation, we can hope for a gradual recovery over the next 2-3 quarters. A lower interest rate regime, easy global liquidity and capital inflows coupled with appropriate stimulus and demand push can result in 7 percent plus GDP growth in FY22 and FY23.
Q: Do you really feel the FY22 earnings would be robust on the back of better-than-expected September quarter earnings, and why?
As indicated above, the recent stronger than expected recovery maybe mainly due to pent-up demand. The sustainability of demand scenario is not yet clear. But, assuming no further aggravation of the situation, we can expect gradual recovery. A recovery in demand coupled with lower interest rates, easy global liquidity /capital flows and appropriate stimulus and demand push will augur well for FY22 and FY23 earnings.
Q: With the winning of Democratic Party’s Joe Biden, do you thing risks like global trade war and some geopolitical tensions will ease in Samvat 2077?
The policy direction may not change with Joe Biden coming to power. Sure, there will be a few tweaks here and there, but broadly the policy measures will be driven by economics and mutual interests. Some tough decisions/policy measures which might have been kept under the carpet due to election imperatives, may be taken up in the first few years of the new regime.
Q: The MF outflow continued in October too. Do you expect the MF equity flow to remain negative in November too given the market at record high levels?
The retail investors have been booking out as they are seeing a good recovery in portfolio NAV. The profit booking is also driven, maybe rightly so, on the belief that the markets seems to be ahead of fundamentals. However, if the market sustains or moves up from here driven by COVID vaccine/ continued demand recovery/ global liquidity, we might again start seeing inflows due to left-out feeling.
Q: What are more things you expect in terms of stimulus from the government as the economy started improving and there is a progress on the vaccine front?
There can be more concessions for real estate, infra, auto, SME/MSME sectors. Also, some further specific relief measures for sectors more affected by COVID can be expected. However, the government should focus more on stimulus on demand side. In this context, the upcoming budget will be keenly watched. The long awaited demand is for lower tax-slabs for salaried class.
Q: The market gained around 10 percent in Samvat 2076. Will the market give double digit return in Samvat 2077 and what are key driving factors for those gains?
Samvat 2077 will be a year of consolidation. We are more constructive on Samvat 2078 provided no further disruptions. Factors like interest rates, global liquidity, monetary policy, fiscal stimulus, demand recovery, earnings momentum will be keenly watched.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.