Abhishek Vasudev spoke to Rishi Nathani, CEO- Dalmia Securities Pvt. Ltd on what the markets expect from the winter session of the Parliament.
The markets have been choppy since quite some time now. What is your medium term view on the markets? What are the likely triggers that can take the markets higher?
In the near future, the markets will primarily be watching how the winter session of Parliament pans out. In case the government succeeds in pushing through the major reform bills, the markets could rally smartly. Other factors that could affect the markets in the medium term would be the outcome of the Himachal and Gujarat elections, the forthcoming Union Budget as well as the government delivering on more reforms and pushing through its divestment agenda. The Reserve Bank of India's (RBI) stance on interest rates could also influence the markets greatly. Any rate cuts going forward would be positive for equities.
What are your expectations from the winter session of the Parliament?
We do hope that the government will succeed in getting all its reform bills passed. The markets are banking on the same, as well as a fresh round of reforms, post these bills getting passed. Our economy has already slowed down considerably, and any dent in the reforms agenda could adversely affect the economy and markets.
How are foreign institutional investors (FII) looking the Indian markets as an investment destination? Going ahead, how do you see the foreign flows coming into the India equities?
The FII inflows into India have been very encouraging. They seem to have a lot of faith in our economy, given the steady pace at which they are continuously buying into our markets, despite a lot of domestic institutional investors selling. In case the government delivers on its reforms and take this agenda forward, we feel that Indian equities should continue to attract FII money.
Auto sector has outperformed the markets given the current conditions. What is your medium term outlook on this sector?
We are positive on this sector, with the current and next quarter historically being the best for auto sales. We expect domestic consumption demand to remain robust and therefore we are quite upbeat on the passenger car and the two wheeler segments. Any rate cuts could also be a positive sign for this sector.
The Group of Ministers(GOM) has finalised the drug pricing policy, which is aimed to control the price of essential medicines. How do you see this move impacting the Pharma sector?
Most of the large domestic pharma companies are already focussing on the generics market abroad, especially the US. This would not be much impacted by the drug policy. However, companies with a higher exposure to controlled drugs in their product portfolio in the domestic market, could definitely see some margin contraction due to these price controls. Therefore, we would like to focus on the companies that would be least impacted due to this drug pricing policy.
What is your view on the PSU banking space in comparison to their private sector counterparts?
While the PSU banks are available at much lower valuations than their private sector peers. We would like to avoid this segment as of now, given their rising non performing assets (NPAs). We would wait for the interest rates to come down and the economy to start recovering, before we take any fresh exposure in this space.
How do you see the information technology (IT) pack to pan out from a medium term perspective?
Given the fact that the US presidential elections are over, a lot of anti-outsourcing rhetoric could now die down, and fresh contracts could start flowing. Also, given the current weakness in the Indian rupee and reasonable valuations for many companies in this sector, we expect IT stocks to continue to do well going forward.
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