The year 2012 has so far seen inflows from foreign institutional investors (FIIs) to the tune of $20 billion, making the Indian markets one of the best performers globally. Anand Rathi, chairman of Anand Rathi Financial Services, tells Puneet Wadhwa that the markets will continue their upward trend in 2013. While FIIs’ interest in India will continue next year, it may not match the current year. Edited excerpts:
Will the US be able to avert the ‘fiscal cliff’? Have the markets factored in the possible outcomes? What do you think about the developments across the euro zone?
The US government and policymakers are battling valiantly to ward off the derailment arising from the fiscal cliff and the same is likely to be averted. As policy makers are taking serious steps to do a soft landing, the markets do not seem to be worried unduly. The developments in the euro zone are more political as economic impact has been factored in. The International Monetary Fund cracking the whip in Greece will send the right signal, and that could avert further worsening of the situation.
What will 2013 hold for the markets, foreign institutional flows and the macro-economy?
Our call is that after a few more minor hiccups – political and economic – the markets should be back on its upward trend in calendar year 2013 (CY13). There could be some easing of gains of the past few weeks in the early part of the year, but that would be more of a blip. FII interest in India would be maintained, but expecting another blockbuster year, as compared to CY12, may be an over expectation.
What are your top concerns / factors that can negatively impact the world economies and markets, as we move into 2013?
The three major factors that would have a bearing on our markets would be a recovery in the US (as that would suck away the interest in our markets), rupee-dollar equation, which could skew our economy, and political upheaval that could impact almost everything, ranging from sovereign rating to budgetary actions, populist measures, etc.
What are the Bills that the markets expect to be cleared in Parliament in the current session?
Other than the banking Bill, and maybe amendments to the Companies Bill and pharma pricing policy, there is not much of a chance for other worthwhile Bills to be tabled, discussed or passed in this session. The impact of the FDI policy on the markets is largely symbolic and should be viewed as a relief bounce, and not a commencement of a rally. Hence, we feel that a minor correction or a small period of consolidation is due in the markets.
What is your investment strategy in this backdrop? Do you see more pressure on earnings over the next few quarters for India Inc. or is the worst behind us?
The third quarter of FY13 could be the last of the earning blip (as envisaged today). Hence, we could see earning traction picking up in the coming quarters. Rupee depreciation will not impact revenues adversely, as almost 45 per cent of the revenues of the Nifty 50 constituents are linked to overseas revenue/exports.
However, a few companies that have substantial input cost from international commodities will get impacted. As the leverage amongst Nifty 50 stocks is also relatively low, the impact on them would be marginal due to the same.
With a slew of IPOs lined up and the performance of the ones that got listed recently, do you think there is appetite for new issues amongst investors? How do you see the primary markets revive in this context?
The absorption of IPOs and some of the large disinvestments (Cairn India, Tech Mahindra, etc.) conveys that there is appetite for quality paper, but at a price. Generic IPO market revival is still some time away.