Even as the stock market remains amid the ongoing slowdown, Prashant Jain of HDFC AMC says that the stock market will not be affected much by it, given the composition of the Nifty.
Even as the stock market remains amid the ongoing slowdown, Prashant Jain of HDFC AMC says that the stock market will not be affected much by it, given the composition of the Nifty. “In this slowdown, everyone is focussing on GDP slowdown and auto sales but no one asked how much is the consumption slowdown in discretionary spending or in automobiles going to impact the market?,” Prashant Jain, ED & CIO, HDFC Asset Management said in an interview to ET Now. Jain said that one-third of the Nifty is composed of heavy-weight financials, which are actually poised to do well as the provisioning cost will come down for banks.
Further, Jain noted that nearly one-third of the market in India, as per the index weights pertain to global businesses – software, pharmaceuticals, metals, oil and gas, refining. These businesses have got pretty much nothing to do with the current status of the 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 told the channel.
Financials, these global business dependant-sectors and utilities make up more than 70% of the market composition, he said, adding that another 10% is capital expenditure roughly which is actually doing well. “If you break up the market this way and start asking questions, the economy at an aggregate level is not doing great. Things are slowing down but how does it impact? You will realise that broadly three-fourth of the market is not impacted,” Jain told the channel.
Amid the current slowdown, Jain reckons that financials will be beneficiaries as 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 noted.