Indian economy has gone through an industrial recession: Pankaj Murarka

Pankaj Murarka, the founder of India Next Fund, says manufacturing, engineering, capital goods and media are sectors witnessing change

Pankaj Murarka
Pankaj Murarka
Indivjal Dhasmana
Last Updated : Jul 30 2018 | 5:26 PM IST
At a time when the macroeconomic indicators, be it industrial growth or inflation or trade deficit, are showing signs of concern, Renaissance Investments Managers has launched a hedge fund -- India Next Fund -- on the theme of economic recovery. Pankaj Murarka, founder of the company, tells Indivjal Dhasmana why the fund is so bullish on India's economy. Edited excerpts:

Why have you launched a fund at this time when the outflow of FPI (foreign portfolio investors) money is at a record high and there is uncertainty due to upcoming assembly elections?

The answer is in your question. When the risk is higher or the fear is higher in the equity market, it is then that you get the best price. The point of highest pessimism is also the point of most favourable risk zone.

But aren't you worried that there are risks involved? 

Our view is that the Indian economy has gone through a very bad phase through the last four or five years. We have gone through an industrial recession. That is my interpretation. 

For an industrial recession to happen, production has to contract in two consecutive quarters. Isn't it?

I look at it differently. The definition you cited above applies to advance economies, not India. If you look at India’s IIP (Index of Industrial production), average growth from 1991 to 2017 has been 6.3 per cent, whereas in the last 5 years it was just about 3.5 per cent. So, I call it an industrial recession. 

If there's an industrial recession going on, what makes you launch this fund?

I believe the Indian economy is at an inflection point, where growth has started to return. The reason for the decline was two back-to-back failed monsoons in 2014 and 2015 and while we were recovering from it, we had demonetisation, RERA and GST. And we expect gains from these structural reforms in the coming 8-12 months.

Do you think investors would buy that Indian economy is on a reviving mode?

We are already noticing their traction in the fund. 

You said that industry has been in recession for the last five years, but even then stock markets were performing well. Is there a disconnect between the real economy and stock markets? If it was artificially up, isn't it poised to go down?

If you look at the stock market, it has been moving on two tracks. So, India experienced an industrial recession but fortunately, we never experienced a consumer recession. In the last five to six years, consumer spending has been doing well, so all the consumer-oriented businesses --retail banks, retail NBFCs, consumer staples and consumer durables -- have done well. Whereas, the industrial part of the domestic economy has not done well.  

Will you look at equity or debt or both?

Our core skill set is equity. I have been an equity investor for the last 22 years. 

Will the fund also invest in indices?

No. We are active fund managers and we believe in buying stocks. 

Is it going to be only stocks or would you look at the commodity market too?

Only stocks. Our focus is on businesses related to the Indian economy. The sectors that are witnessing change are manufacturing, engineering and capital goods, media, both online and broadcasters, and hotels. 

Why not real estate?

Earlier, we were not positive in real estate prices, but RERA will be a game changer in the near future. As a result, we like selected real estate stocks.

What is your outlook for the banking sector?

I think we are at the cyclical peak of bad loans. 
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