Oil prices again down to about USD 52 53 on Brent and
gold weakness will drive stock prices higher’
The recent weakness in real estate and gold is the reason why domestic investors are flocking towards stocks, as can be evidenced by inflows data into equity mutual funds.
That’s the belief of Manishi Raychaudhuri of BNP Paribas, who in an interview with CNBC TV18’s Sonia Shenoy and Latha Venkatesh said this trend could hold up a bounty for equities in the long term.
Canada Goose Outlet «India savings rate is about canada goose outlet online uk 34 35 percent, it is a USD 2 trillion economy, approximately half comes in to financial assets, that is close to about USD 350 billion,» he said. «If 10 percent of that gets allocated to equities, that is about USD 30 35 billion per year. That is larger than the highest yearly foreign institutional investors (FII) inflow that India has received ever.» Canada Goose Outlet
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Canada Goose sale On the technical front, Dr CK Narayan goose outlet canada of Growth Avenues said the Nifty crossing 8500 last week on volumes indicates that the intermediate trend is positive. Canada Goose sale
Below is the transcript of the interview on CNBC TV18.
canada goose coats Sonia: This week was a good one for the bulls. India climbed the wall of worry and the Nifty is now back above 8500. Has the uptrend in the market resumed? canada goose coats
Raychaudhuri: It is very difficult to take a call right now because if you look at the entire region, the situation has been quite uncertain. For example, you rightly point out that India has been moving upwards, it has climbed the wall of worry and partly the reason is that the recent results have been slightly better than expected.
If you canada goose outlet store look at the most recent examples, even some of the public sector banks like bank of Baroda despite the small canada goose outlet toronto factory increase in non performing loans (NPLs), it delivered slightly better than expected numbers. So even hitherto unloved sectors, unappreciated stocks etc, they have been giving some small positive surprises.
canada goose clearance sale So, that has been the story for India but if you look at the rest of the region, things have been quite volatile particularly in China. canada goose outlet nyc In case of China the expectation was that the government would act as a backstop for their equities and that has happened only to very limited extent and so I would think the sentiment across Asia until and unless it improves sustainably, it would be difficult to conclude that India would possibly «resume the uptrend» to borrow your phrase. canada goose clearance sale
canada goose uk black friday Having said that, in the near term and in the medium term India would continue to outperform the rest of the region because investors appreciate that it is still one of the better markets with a good choice of stocks available even though the valuations may seem clearly on the more expensive side at this point of time. canada goose uk black friday
Latha: What according to you are the pockets that offer an upside potential now? PSU banks came out of the woodwork this week despite stocks like Punjab National Bank (PNB), Bank of Baroda delivering canada goose outlet parka fairly weak numbers, would you recommend investors buy PSU bank stocks now that the capital seems to have been arranged?
Raychaudhuri: Not really. We have always canada goose outlet jackets liked the private sector banks and we think that basic concerns for PSU banks, which are capital raising and asset quality, they are still very much alive. Therefore even though we have seen a canada goose outlet in usa significant canada goose outlet degree of outperformance by the PSU banks over the last couple of trading sessions, it is partly due to prior short positions built in which are getting covered and also some news flow of late which has been favorable like the news about bank recapitalization and where the government may actively participate a lot more than what it planned to earlier.
Canada Goose Online But I would think that, one, we need to wait and watch as to what extent that recapitalization actually happens and secondly one would have to watch for the bigger, more fundamental variables like asset quality and the capital adequacy ratios for the PSU banks canada goose outlet online and how that problem gets addressed. So our preference even now remains clearly tilted towards the private banks side. Canada Goose Online
canada goose store Sonia: I will come back to sectors in a bit but before that, we were speaking to Nilesh Shah of Kotak Mutual Fund earlier this week and he spoke about Rs canada goose factory outlet 3.5 lakh crore of investment into the mutual funds over the next five years. Are you advising both your retail and institutional clients to increase allocation to this market now? canada goose store
Canada Goose online Raychaudhuri: I am not exactly permitted to advise retail clients as we deal more and almost exclusively with institutional clients but the point that you made earlier, which is the fact that there is a lot of allocation going into mutual funds, equity mutual funds, that is clearly correct and the background reason behind that is not only the likely recovery in equity as a whole but also the fact that alternative asset classes are no longer that attractive. Canada Goose online
Take for instance gold and property, which used to occupy the lion share of asset allocation of an average household saver. So, close to half his canada goose outlet shop savings used to go in these real assets and many of these particularly property in the large top tier urban cities and even gold is significantly less attractive than it used to be earlier.
Canada Goose Parka So it is the lack of alternative asset classes which is also contributing to this massive deluge of flows into equity funds and we think that a combination of this relative attractiveness of equities and the unattractiveness of the alternative asset classes is official canada goose outlet likely to canada goose outlet canada make this switch continue for a while. So, I canada goose outlet uk personally think that since the quantum of money that can potentially come into equity mutual funds is huge. Canada Goose Parka
You think about it simply this way that India savings rate is about 34 35 percent, it is a USD 2 trillion economy, approximately half comes in to financial assets, that is close to about USD 350 billion, just if 10 percent of that gets allocated to equities, that is about USD 30 35 billion per canada goose jacket outlet year. That is larger than the highest yearly foreign institutional investors (FII) inflow that India has received ever. So, the potential for domestic money to go into equities and to support equity markets is massive and we haven even scratched the surface on this front.
cheap canada goose uk Sonia: So what do you do then with some of these stocks which have strong managements the likes of Tata Motors, ICICI Bank and Tech Mahindra that have gotten de rated due to external environment. In fact in some cases like ICICI canada goose outlet sale Bank you have seen a good recovery in earnings as well, would you advise investors to increase allocation and keep the faith there? cheap canada goose uk
canada goose uk outlet Raychaudhuri: For https://www.canadagoosejacketsoutsale.com a majority of them, at least the stocks that you talked about, canada goose outlet new york city we have a positive view. So, some of these have lost out or have been de rated because of concerns that are not really connected with India. So, for example if the Chinese auto market is slowing down, then that has a collateral impact on certain stocks but at the same time we think that the impact of these external factors have possibly been too strong for some of these stocks. canada goose uk outlet
canadian goose jacket Even some of the banks that you talked about, the private sector banks, the original concern was the pressure of NPLs over the last two quarters where the asset quality had visibly worsened but if one looks at the most recent quarter results, many of those concerns are getting addressed. So, I would think that the negative influence or the negative impact that we had seen over the past couple of quarters are possibly temporary and therefore for many of the stocks that you talked about, I would rather be still a buyer at these reduced valuation levels and canada goose outlet black friday they are possibly providing a buying opportunity. canadian goose jacket
Canada Goose Coats On Sale Latha: A couple of months ago everyone feared that China would get more flows than India but since then China has fallen off a cliff I canada goose outlet think it is 20 percent loss in a quarter, where does India feature in your pecking order and what is the upside potential for Indian markets over canada goose outlet store uk say the next one year? Canada Goose Coats On Sale
Raychaudhuri: First of all I think yes in this whole collateral damage that rest of Asia particularly China has gone through, Indian equities have possibly I wouldn exactly say emerged stronger but at least some of the fundamental factors are therefore playing in favor of India. So, if China continues to slow down, it obviously has a negative impact on commodity prices which we are already seeing. Oil prices again down to about USD 52 53 on Brent and therefore the fundamentals of India both on the economic side, the macroeconomic perspective and for corporate earnings tends to be slightly better.
We are already seeing some companies, particularly in the manufacturing space being able to pass on the commodity price benefits to their bottom lines. We have seen that for some of the auto companies, some of the consumer staples companies and we think that over the next two quarters this so called wealth transfer from the commodity producers to the commodity user is likely to accelerate.
uk canada goose So, to cut a long story short, we remain positive on India as a consequence of what is happening in the outside world and we remain overweight in our Asian model portfolio on India. Now, to share the target with you, we have a Sensex target of 30,300 by the end of this calendar year which is end of 2015 which is approximately about 8 10 percent from the present levels over a span of about five months. uk canada goose
So, if you extrapolate that, I would think over canada goose outlet uk sale a one year timeframe the Indian market should easily give about 15 20 percent return to their investors and that is pretty much in line with the earnings growth or maybe slightly higher than the forecast earnings growth over the next couple of years.