NEW DELHI :
In an interview with Mint, Ashutosh Tikekar, head of worldwide markets, BNP Paribas India, talks about triggers and occasions that should be watched out for the markets, sectoral views, and views on mid-caps and small-caps and the way India is positioned amongst rising markets
Edited excerpts:
Amidst volatility within the markets, what are the triggers and occasions that should be watched for?
Rising oil costs might pose a problem for the Indian financial system and may stroke inflation. That mentioned, the market will see oil remaining under $100/ bbl as being manageable. Financial coverage this week can be a key occasion to look at for. Focus stays on RBI’s stance which has remained growth-focused up till now. We anticipate RBI to decrease progress projections and enhance CPI estimates for FY23 from 4.5% to five.25%. Rising oil costs pose a big headwind going ahead and we anticipate CPI to vary between 5.5% and 6% and a complete of 100 bp hike on this calendar yr.
Taking a look at inflation whether or not the accommodative stance of RBI stays or goes away can be watched. The RBI is focusing on inflation at 4.5 %, which appears to be like too aggressive given rising oil costs and different components equivalent to greater commodity costs. The inflation charge of 5.5 to six% is what might be lifelike. General, what can be the stance RBI now takes will stay to be seen.
What’s your view on varied sectors? That are those that stay laggards and that are those that provide alternatives?
Whereas the general financial system is recovering, some sectors are beginning to see the impression of rising enter prices, which, in flip, might impression demand for them. Inside autos, two-wheelers and tractors might face this greater than different premium segments, given their rural and semi-rural buyer base. The pent-up demand story is taking considerably of a again seat due to costs hikes taken by the businesses to offset inflation. We’re noticing the identical with the FMCG sector, and firms have already taken 10-15% value hikes which will not be straightforward to cross on.
Though worker prices and attrition are too excessive, the IT sector appears to be like moderately positioned. Banks additionally stay well-placed regardless of attrition points. We predict prescription drugs and hospitals ought to do nicely as demand for these items and companies is considerably much less elastic. Moreover, export-oriented sectors equivalent to IT and prescription drugs profit from a stronger greenback.
The hospitality and aviation sectors are seeing a rebound after two years of ache. Pent-up demand helps eating places as nicely. Nevertheless, over the medium time period one must be careful for any impression on disposable earnings due to greater inflation. Rising ATF costs might offset at the least a number of the advantages from greater demand.
Commodities ought to proceed to do nicely given the battle in Europe and sanctions are more likely to stay even when the state of affairs eases there.
Can traders discover pockets in mid-caps and small-cap shares?
We see modest general returns for equities this yr with central banks, particularly the Fed, shifting in the direction of extra restrictive financial insurance policies. In such an atmosphere, we really feel traders should be extra discerning of their selection of mid- and small-caps. Historical past additionally means that bigger corporations are capable of higher cross on greater prices. Subsequently it could pay be extra selective and maintain some money in hand too.
What are your views on FPI flows?
Whereas FPI outflows have continued in an unabated method, DIIs appear to have absorbed most of that to date. Within the close to time period, the alternate options inside different asset lessons don’t look notably interesting both. That mentioned, inflation worsening a lot past present ranges might be a danger even for home flows. Moreover, charge hikes expectations from the Fed have elevated considerably, with even two back-to-back 50bps hikes now being on the desk together with quantitative tightening. Such circumstances are usually not beneficial for FPI outflows to reverse.
How is India positioned amongst rising markets?
In contrast with different rising markets, we predict India stays higher off on progress. Nevertheless, oil is a free finish. The dangerous state of affairs includes oil costs rising to $140/ bbl versus the federal government expectations of $80-85/ bbl, which might in flip damage the fiscal place and impression progress and capex plans
Supply: Live Mint