Given that the economy is slowing amidst high interest rates, any company with high operating expenses gets impacted irrespective of which sector it belongs to, believes Hemant Kanawala, head of equity at Kotak Mahindra Old Mutual Life Insurance. In an interview with Devangi Gandhi, he says that while the market has stayed in a range for quite some time, it is difficult to see a large upside in the market.
Markets seem to have taken the RBIís tightening measures in their stride.
Contrary to immediate reaction on the RBIís actions on short-term rates, the inflows have remained healthy. Today, India is a preferred destination amongst emerging markets because of its relatively strong consumption theme. Foreign investors mainly consider two criteria to manage their investments: the size of the market; and the economic activity.
While some markets may be more attractive than India, their size may be such that they canít take a large amount of capital. What works for India is that it is a large country and it needs large capital to fund its growth. Investorsí biggest concern at this point is the currency, and actions taken by the policymakers in defending the rupee are well received by investors. The GDP growth has already come down to the lower side of its range and a further marginal deceleration may not create huge incremental damage.
Despite higher volatility the market has stayed in a range for quite some time, but it is difficult to justify a large upside in the market. The market needs triggers like a turnaround in GDP and earnings growth to move up. As long as the money does not leave the market, it may trade at healthy levels. The money may get churned between sectors or stocks depending on sentiments on growth.
What is your outlook on the rupee given the way it has bounced back?
The recent fall in the rupee was more sentiment-led than fundamentals. There were two concerns i.e. absolute value of the current account deficit and means to fund it. The recent measures taken by the government, particularly on the gold import side, has resulted in substantial reduction