Indian markets may well be impacted by global news flow but any structural change will be visible only when the domestic fundamentals improve. Manish Kumar, executive VP & investments head, ICICI Prudential Life Insurance, tells Ashish Rukhaiyar that foreign flows that have slowed in the last couple of months will see a notable revival only if the Indian policymakers can get the economy back in shape.
Given the macro-economic factors, what is your take on the equity market?
We have been talking about a range-bound market with a downward bias and it has been that way for some time now. The reason is that we have seen some deterioration on the fundamental factors like GDP growth coming off even while inflation has remained high for almost two years now. These factors have led to tight money conditions thereby capping the upside even though we saw periodic flow of money coming in from FIIs. The trend witnessed is that market is getting support at lower levels due to attractive valuations and, at higher levels it gets capped because of weakness in GDP growth and economic fundamentals. The investment climate continues to remain weak. There has also been a slowdown in earnings growth. We already saw the Nifty touching 5500-5600 levels on the upside and around 4600-levels on the downside and we believe we will trade in that range. The second half of the year could be better than the first half but that would be a function of two factors ó developments in Europe on the global front and policy action on the domestic front.
RBI, against a wide consensus on the street, kept rates unchanged. Your comment?
RBI in its earlier policy meeting had cut the repo rate by 50 basis points as against the expectation of only 25 basis points. At that time they had indicated that further rate cuts would be difficult until we see some serious policy action on the fiscal front. Not only that, the currency has depreciated by almost 10% in the last 3 months raising fears that it would stoke inflation. This has possibly caused the central bank to stay away from doing any more rate cuts. Given the tightness in banking liquidity, moderate CRR cut would have helped.
How is the depreciation in rupee affecting the market?
Too much volatility in the currency is not good for any country and especially if you are losing value in a significant