Navin Agarwal, CEO, Institutional Equities and Rajat Rajgarhia, MD - Institutional Equities, Motilal Oswal Securities spoke with CNBC-TV18 on the sidelines of the Motilal Oswal 10th Annual Global Investor Conference beginning today.
According to Agarwal, India is one of the best performing markets in the world currently and the foreign investors continue to repose their faith in the Indian equities.
Rajgarhia expects a 15 percent growth in the Sensex earnings in FY15 and 20 percent in FY16. Going ahead, he sees strong earnings upgrades happening and a lot of flows from India directed funds.
The key theme of the conference is likely to be the next move by the Reserve Bank of India and the government. The broking house believes the management by the RBI in the last nine months inspired a lot of confidence in the India economy and hence, the market.
Rajgarhia likes financials, industrials and consumer discretionary. He continues to remain bullish on midcap space and likes Arvind, Cox & Kings and Kaveri Seed from the pack.
Below is the verbatim transcript of the discussion:
Q: Your speakers list at your investor conference is impressive. Can you take us hrough your conference? What is the theme and tell us about the speakers that you are looking forward to?
Agarwal: This is the 10th year of the Motilal Oswala Annual Global Investor Conference. It has grown in terms of size and participation both from the corporates as well as from investors year after year.
This year we have over 110 Indian companies, 225 company representatives from those 110 companies that are participating in the conference.
On the investor side we have about 180 funds, global as well as domestic funds who are participating in the conference, about 750 people representing these 180 funds.
Q: Is this also an indication that you get more companies and more funds because the markets are bullish?
Agarwal: A whole bunch of things. So the political change in May has actually brought in a lot more interest from international investors. So we have for the first time the tally of international investors cross the 100 mark. This is something that is unprecedented and you should bear in mind that August season is a holiday season for the west with a lot of funds in the US and Europe actually being on holidays, this 100 plus number is not withstanding the holiday season there.
The political change, the earnings upgrade cycle, the strong performance of the market year-to-date we are up 25 percent, 12-month basis we are up 45 percent. This is one of the best performing markets in the world.
All these things have come together to create a big interest from the global investors and also from the local investors in the conference.
Q: What was your initial conversation with over 100 FIIs and 180 investors who have gathered? Is there an incremental positive now that crude is almost on a secular basis closer to the USD 100/barrel mark?
Rajgarhia: There are a couple of things that are just getting better for India on a moving basis. First is crude which is now trading close to its low and that coinciding with the fact that the diesel under recoveries are almost zero, marks one of the biggest reforms in the last one decade for India for the oil and gas space.
But two other things, first the way RBI has managed the whole currency and the forex front over the last nine months has inspired lot of confidence for investors in the stability of the currency.
Secondly, the gross domestic product (GDP) numbers that will be released later this week, will start showing momentum. We are expecting almost 80-90 bps improvement over the March quarter. So I think many things are just beginning to fall in place and this is just the first quarter of improvement be it macro, be it corporate earnings or be it valuations. Investors are very clear that this is a historical mandate, this is a five year mandate. We are starting this mandate with a 4.6 percent GDP growth when the potential of this country is much above 7 percent. We have the leadership at the top that can help us achieve this potential for us over this five year period.
Be invested, get into the right sectors and stocks and that is what this conference is all about.
Q: A lot of brokerages have actually gone ahead and raised their Sensex EPS targets for the full year post the June quarter earnings. I know you have done so yourself, where do you stand at in terms of the Sensex EPS for the end of the year and what are the sectors that could actually lead it there?
Rajgarhia: This year for FY15 we are looking at a 15 percent growth in the Sensex earnings at an aggregate level but for FY16 which is going to be the first year of big recovery, we are estimating an earnings growth of 20 percent.
The important point one needs to highlight is that the average growth rate for Indian corporate sector over a long period of time is 15 percent but the 10 year 15 percent growth is divided between five years of 8 percent and five years of plus 20 percent growth.
The last six years growth has been about 8 percent and we are just at the first year of the beginning of a phase where the next five year growth could be north of 20 percent.
Our team as an aggregate believes that the earnings upgrade cycle has just begun so this is probably the first quarter where we have seen reasonably strong upgrades happening and this is likely to continue for many quarters to come as the macro gets better from here.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
