Indian fund managers see earnings revival, eye opportunity in consumption

Indian wealth and alternative investment managers expect the next federal budget to propose measures that will improve consumption and bolster infrastructure to revive economic growth.

Newly appointed Finance Minister Nirmala Sitharaman will present her first budget on Friday. Growth slowed to a five-year low of 5.8 per cent in the first three months of 2019, amid a liquidity crunch at non-banking financial companies. That’s put pressure on recently re elected Prime Minister Narendra Modi to deliver on a stimulus plan.

Here’s a roundup of views from fund managers on current opportunities in the market:

Nalin Moniz, chief investment officer, alternative equity, Edelweiss Asset Management Ltd.

Liquidity conditions are slowly normalizing; the cash squeeze should normalize in 1-2 quarters.

Expect to see a broad-based revival in earnings in the latter half of FY20.

Sees opportunities in consumption, exports and financial services sectors on a 5-year horizon.

Over the longer term, both consumer goods and discretionary consumption are expected to boom as the Indian economy grows from $2.7 trillion toward $5 trillion.

Nifty’s current valuations are incomparable to the past, as index’s composition has shifted from manufacturing toward financials. 

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Vijay Krishna Kumar, head of liquid alternative investment, IDFC Asset Management Co.

The budget will be another non-event accounting exercise.

It’s difficult to get excited without clarity on the Bimal Jalan committee outcome on transfer of the central bank’s surplus funds to the government
 

Waiting to see a concerted policy response to arrest the non-bank financial crisis, which “has all the drama of a slow moving train wreck.” Without something concrete, it’s hard to build a bull case on the consumer segment.

The deficient monsoon is a concern, as the rural economy and wages were already stressed.

“We are long vega” going into the budget announcement.

Umang Papneja, senior managing partner, IIFL Wealth Management Co.

The liquidity squeeze due to the credit crisis has created an investment opportunity.

The “flight to quality” trend since September is likely to continue for some time.

Spotting some good ideas amid the turmoil in the real estate sector; introduction of a regulator may help drive consolidation; stronger players are likely to get cheaper credit.

It’s a “divergent time” for equities, as only a few stocks are driving the indexes higher; it’s time to gradually start investing in select mid-caps stocks after a sharp correction.