Indian markets are resilient and should see little impact from weak global cues, which actually could be positive for India, says Tridib Pathak, head of equity, Avendus Investment Managers Private Limited India and Fund Manager, Avendus Olivo PMS.
Talking to Moneycontrol, he said that with inflation under control in India, there is a strong case for lower interest rates, which will further support market growth. Among other things, the market veteran with over three decades of experience also said why the ongoing developments around yen carry trade could impact markets like India, growth in the QSR segment, why is he bullish on private insurers and also his take on the taxation aspect of PMS versus mutual funds.
On yen carry trade impact
Speaking about the yen carry trade, Pathak said that it is difficult to estimate the exact scale of its impact on the markets. He, however, said that while the yen carry trade is not a significant concern for his PMS strategy, “the recent increase in Japanese interest rates and the global trend towards lower interest rates, suggests that this environment will likely benefit markets, including India, as global rates decline over the next six months to a year."
Also, with inflation under control in India, there is a strong case for lower interest rates, which will further support market growth, he said. Pathak also said that domestic flows are also significantly strong, reducing the dependence on foreign institutional investors (FIIs).
On growth potential in QSR as a segment
Pathak said that there has been an increase in eating out, particularly in smaller cities. This shift reflects an increase in rising income levels and is driving growth in the quick-service restaurant (QSR) sector. He said that there is a significant growth potential going ahead for QSR companies because in regions like Western and Southern India, brands like McDonald's have only begun to scratch the surface with their current number of outlets.
He, however, said that in the digital food delivery companies there is scepticism about profitability. It takes time for these companies to become profitable and even if they do, the ROCE (Return on Capital Employed) will still be low, he says.
On strong fundamentals of private life insurers
Pathak said that life insurance companies in India are currently trading at one to one-and-a-half standard deviations below their three- and five-year averages, despite having strong fundamentals. They also have a growth visibility for the next 10 to 20 years. Plus, the premium growth is expected to be around 12-15 percent for life-insurance companies, he said. However, in this sector, the focus is on private insurers, as privatisation typically leads to market share gains for private players, he said.
On tax on churn in PMS
PMS is designed for long-term investing, typically over four to five years and so even if there is a churn on tax, it does not bother clients, said Pathak. He said that frequent churning in PMS can complicate tax reporting and reduce the strategy's effectiveness. Typically, if one has a high amount of churn in a PMS portfolio, it will incur short-term capital gains taxes. In contrast, a mutual fund that churns frequently doesn't require to pay taxes until you withdraw your money, at which point you may be liable for long-term capital gains tax.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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