The cabinet has cleared a mega Rs 2.11 lakh crore bank recapitalisation plan, of this Rs 1.35 lakh crore will come via special bonds while the rest will come in via budgetary and market support.
In an interview to CNBC-TV18, Pramod Gubbi, Head of Equity at Ambit Capital, spoke about his reading of the market and his outlook.
We were waiting for a cue for the investment cycle to pick up. Public sector undertaking (PSU) bank recapitalisation is perhaps the first step. We still need to address the demand side of the investment but yes, the supply at least is in place now, he said.
The shape of economic growth will necessarily move from consumption led to investment led at some stage, he added.
This step augurs well for the broader cyclical segment of the market particularly sectors which have been short of capital, particularly real estate, metals, engineering and construction, infrastructure. These could see fund flows coming into them, said Gubbi.
The ones that had benefited by the lull in the PSU space particularly the private sector banks and non-banking financial companies (NBFCs) will see some money flow out of them, he further mentioned.
He expects overall credit demand to pick up across the board.
For FY19 as a fiscal year, we will see an uptick in pretty much every macroeconomic indicator that we can think of, be it gross domestic product (GDP) growth, credit growth and earnings growth as well. We should double digit earnings growth in FY19, he said.
On infrastructure, he said you need to focus on sectors and within sectors, particular stocks and companies which were starved off capital in the past. We have had a three-four years cooling off period where they have repaired their balance sheets to some extent, Gubbi added.
According to him, foreign institutional investors (FIIs) definitely look positively at a few sectors.
Speaking about telecom, he said the economics on telecom are not cleared yet. You could potentially be looking at different business models emerging in telecom.
He also believes that certain sectors like real estate, metals, infrastructure and construction may finally be able to access capital and fund growth in future.
For full interview, watch accompanying video...
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