Expect inflation to fall; bet on pvt banks: Mirae Asset Global

In his debut monetary policy, RBI Governor Urjit Patel announced a 25 basis point cut in the key policy rate -- a move which is in line with expectations from large market participants.Rahul Chadha, Head, Asia Pacific Investment Division, Mirae Asset Global Investments said that the rate cut has reinforced the stance that RBI's rate decision has been based on inflation as determined by Consumer Price Index. Chadha expects inflation -- which trended down to 5.05 percent in August from the month ago --  to head lower making a case for a further rate cut.Chadha believes the next six months will be important from a market perspective as one would look at the earnings season. He also added that if companies were able to deliver good results then it will take the markets higher from their currently levels. The fund house will watch the earnings season closely. Mirae Asset Global continues to be optimistic on the private sector bank space. Chadha feels the private sector banks has gained market share as credit growth is favorable and looks attractive.  He said the fund house will continue to buy on dips in the sector. He is also betting on select NBFC stocks and investing in the sector from a medium-term perspective. The global fund house is also positive on motown. Chadha was quick to add that the festive season will help gain volumes for the automobile sector.Mirae Asset Global Asset also has an exposure to consumer discretionary and retail stocks.Below is the transcript of Rahul Chadha's interview to CNBC-TV18's Anuj Singhal and Latha Venkatesh.Anuj: The policy has come and gone there is a rate cut that the market wanted but may be the policy language not as dovish as the market would have hoped for. What is your verdict?Chadha: The rate cut which one has seen is positive, but the policy is a move in the right direction and clearly reinforces the stances RBI has been taken over the years that it is going to watch inflation and then accordingly cut rates, so maintain its independence in a way. What the policy laid out is what our basic view is that if government continues to do what it is doing, financial inclusion, infrastructure roll out in the rural, semi-urban area because of productivity improvement, because of supply side reforms you can call it the inflation which was always inherently high sticky in India should go down. That would give room to the central bank to cut rates. So, I think we should be happy with this rate. The rest is contingent on whether government does the necessary steps to create the enabling conditions for adequate supply side reforms in the economy.Latha: What you made of the monetary policy that if the monetary policy is interpreted as no future rate cuts immediately would that be a bit of a negative in your approach to banking stocks or markets?Chadha: From a market perspective next six months are important as we go into October people will look at the asset quality concerns which are coming largely from couple of large corporate private sector banks or the public sector banks I think in the January- February results one would look at the rural economy revival.So, what markets now want is numbers. The euphoria of goods and services tax (GST) is behind us. Valuations are relatively high compared to the region and earnings delivery is what is going to take this market higher from here.