Sandeep Nanda, chief investment officer, Bharti Axa Life Insurance, tells Priya Kansara Pandya that markets can regain the 20,000 level only on strong earnings growth momentum. Edited excerpts:
If such rangebound trend of August continues, how will Indian markets reach the earlier highs of 20,000 levels by March, as estimated by many market experts?
We could reach the 20,000-plus levels again, but that depends on many factors. The most important would be the trend in earnings growth.
If you have observed, there have not been any index upgrades after the June quarter, and results were better-than- expected only in few sectors like banking, financial services and select auto companies.
If such trend continues, it will be difficult for India to justify its high valuations and robust inflows compared to other emerging markets. Also, the magnitude of interest rate hike is significant, as we are in an expansionary phase. Moderate growth in the developed world is essential to keep up the momentum.
Do you think foreign institutional investments of $17.5 billion in CY09 will be crossed in CY10?
In terms of foreign inflows, we will not be able to cross the $17.5-billion mark in CY10, as India saw higher-than-normal share of foreign inflows in the past few months, which is not sustainable. Though we are a defensive market, valuations have become expensive.
Chinese policymakers fear a bubble in the real estate market? How would it impact us?
Indian markets — real estate and equity — are unlikely to get affected, as Chinese policymakers will try to play a balanced approach to handle their economy.
If growth becomes a question, then stimulus measures will start coming back. If they find overheating in the real estate market, they will slow down in lending of second and third homes and try to cool property prices.