Amid economic slowdown, top fund manager says good time to invest in stock market

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Updated: September 5, 2019 11:23:52 AM

Amid the ongoing slowdown, Prashant Jain of HDFC AMC says that stock markets are offering good value as good moves and valuations do not come together.

Rupee had settled at 72.12 against the US dollar on Wednesday.Sharing key reasons why the Nifty financials have down reasonably well, Prashant Jain noted that the provisioning cost will come down for banks.

Amid the ongoing slowdown, Prashant Jain of HDFC AMC says that stock markets are offering good value as good moves and valuations do not come together. “The best investments are made in tough times and the biggest mistakes are made in great times. These are good times to invest. People should assess their risk appetite, long term capital and invest accordingly,” Prashant Jain, ED & CIO, HDFC Asset Management said in an interview to ET Now. In this slowdown, while investors are focusising on GDP plunging to a 6-year low and slowing auto sales, the slowdown in discretionary spending will have limited impact on the stock market, according to Jain. “How much is the consumption slowdown in discretionary spending or in automobiles impact the market? It’s important to look at the composition of the markets. One-third of the market is financials,” Prashant Jain said. 

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Interestingly, while the broader markets have seen a severe correction, top 10 Nifty stocks have remained resilient. According to a recent Edelweiss report, the Nifty 40 (an index constructed with the 40 stocks excluding top 10 stocks) is at a level of 9000. Sharing key reasons why the Nifty financials have down reasonably well, Prashant Jain noted that the provisioning cost will come down for banks. “The pace can be discussed but by next year, we should be back to near normal levels of provisioning and profitability. Many of the NBFCs are facing some challenges. Not all of them but quite a few of them. Banks should be able to gain share. Even in an environment of slow overall credit growth, banks should do reasonably well,” he told the channel.

Taking stock of the composition of the markets in India, Jain said that nearly one-third of the index weights pertains to global businesses – software, pharmaceuticals, metals, oil and gas, refining. These sectors don’t have much to do with the local economy.  “Interest rates are down, currency is depreciated. So in a way good for them, two-thirds of the market is out. Another 5% of the market is utilities which again is not much impacted by economic slowdown,” he noted, adding that the slowdown will therefore have limited impact on Nifty’s performance.

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