While Q3FY15 has been disappointing and Q4 may not be much different, earnings growth will likely be phenomenal...
Interview: Anand Rathi, Founder and Chairman, Anand Rathi Financial Services
While Q3FY15 has been disappointing and Q4 may not be much different, earnings growth will likely be phenomenal in FY16 and FY17, says Anand Rathi, founder & chairman, Anand Rathi Financial Services, in an interaction with Jash Kriplani. Excerpts:
Where do you see the Sensex in coming years?
In three years, I see the Sensex touching 50,000. You can easily take a 15-20% growth on cumulative basis from hereon.
How does Anand Rathi plan to capitalise on this bull run?
We have increased the number of wealth managers by about 50% in last six months and plan to double our headcount in the coming fiscal. We are expanding the reach of our Investment Services segment that serves individual investors (retail). The worst is behind us as far as the commodities business is concerned.
Given the poor Q3 earnings, are markets looking expensive?
Q3 has been disappointing and I don’t expect Q4 to be much different. But, for FY16 and FY17, earnings growth will be phenomenal. Moreover, against a trailing 12-month PE of 20 for Sensex, the PE of BSE Smallcap is at 7. So, you can really see where the value lies.
Which sectors do you see leading the economic growth?
Infrastructure is going to see lot of investments as the government has cleared most pending environmental clearances.
When can we see the capex cycle picking up?
Now would be the ideal time. With low energy costs, raw material input costs have also fallen. With other economies not doing so well, the demand for commodities is unlikely to pick up and the prices are likely to remain low. If we have a capex cycle now, we will get the advantage of low input costs and low interest costs across the world. For the next 2-3 years, I do not expect global interest rates to rise. On the domestic front, we can see a further 100-bps rate cut in the next financial year.
Are inflationary pressures now truly behind us?
Globally, food prices are lower. India is sitting on huge stockpiles of food. Unlike the previous government, which kept raising the MSP, this regime is more cautious on hiking food prices. So, inflation is no more a concern.
What is your view on fiscal deficit, given the favourable global conditions?
Because of fall in oil prices, both fiscal deficit and current account deficit are likely to benefit. Subsidies have reduced too. If fiscal deficit goes down, government borrowings go down and that money is available to the private sector for investment. Next year, I see fiscal deficit going down sharply — and government borrowings not going up sharply — therefore, more liquidity will be available in the markets, both for investment and consumption.
Can we see a selloff as and when the US Fed raises interest rates?
It is no longer a major concern as chances of rates going up in Europe and Japan are unlikely because they are still under pressure. They are pushing more liquidity into the system. There will be a short-term impact, but, as the saying goes, savings chase earnings. The money will go where profits come. And if Indian corporates are able to generate good profits on the back of higher GDP growth and higher demand, they will continue to attract both domestic and foreign investors.
Any expectations from the upcoming Union Budget?
Securities Transaction Tax and Commodities Transaction Tax should be removed. Clarity on taxation of capital gains should be given so that IT department cannot consider it as business income.