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Global cues will drive markets in September: Ankur Varman

05 Sep 17 | 12:00 AM

Country’s gross domestic product (GDP) will take at least two quarters to recover with consumption making up for the low government expenditure and private investment, says ANKUR VARMAN, AVP - Institutional Equity sales at SBI Capital Markets in an interview with Aprajita Sharma. He also shares his views on mergers of public sector banks, earnings growth and India’s space among emerging markets.

Destocking by companies in run up to goods and services tax (GST) rollout and weak demand due to the cash ban pulled down the GDP growth to a three-year low in June quarter. Do you think it is one-off and we may see the economy recovering going ahead?

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This is a lifetime event. It is not every day that you have such a double whammy for the business. This is reflecting on the GDP. GST is a big shift for the economy, which will take time to adjust, so it will be naive on our part to predict a sharp recovery. It will be a gradual process that will consume at least two more quarters.

Given the macro-economic indicators, do you think that India's appeal as top EM investment destination can take a hit?

Yes. The data is showing a huge FPI outflow in August but on year-to-date basis, India has garnered more inflows than even South Korea. It is not a mean feat. Let’s also not forget that domestic institutions (DIIs) have been buying every single month barring one so far this year and their positive figures have been higher than any negative figures that FIIs have thrown at us.

I believe, India will remain the destination of choice. We expect 'C' from CGIX (consumption, government spending, investment, forex) to take over from here and make up for lower 'G' and virtually absent 'I'.

What are the key triggers that may drive the market in September? If the Nifty50 were to get a hold of 10,000 level this month, what factors may come in support of the index?

It is a risk on trade world-over and India is also a beneficiary. Locally, earnings have not been there for last three years, but markets look ahead and with every passing quarter, we are reaching closer to the hockey stick recovery in capex. We are all too geared up to global events and that will be what will drive the markets in September.

Do you think recapitalisation of public sector banks (PSBs) would make more sense than mergers?

Recapitalisation made sense even a year back, but there are too many skeletons in the cupboards of these banks. Resolutions have now finally started happening - be it at Essar or JP Group. Many of these banks have no business being there as they simply can’t compete. Also, for long they have been used by the political machinery as well. It is better to merge them. It will be a pain for the few better banks but will be beneficial for the system in the long run.

What would you prefer value or growth? Which are the pockets that look attractive from a short-to-medium term perspective?

Both have their places. Growth for short-term players, and value for long-term investors as finding growth with value is extremely rare. Pharma is a space where value has emerged and auto remains the growth sector. The IT sector is reaching a value-buy zone; that can still be underweight (for investors).

Since having a strong and stable management is one of the textbook principles of investing, can a boardroom battle and the way it hit Tata group and Infosys, have a long lasting impact on company's business?

Both these groups and companies therein are so strong in their culture that I am sure they will tide over this fiasco.

What are the key takeaways for investors from the RBI's annual report?

Lower dividend to government on account of higher expenditure for fresh note printing will impact government spending, especially with fiscal targets being almost 92% hit. Questions still remain on effectiveness of demonetisation too.

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Sensex

Company Price Gain (%)
Dr Reddy's Labs2,486.457.47
Cipla591.454.04
Lupin1,032.453.02
Sun Pharma.Inds.519.552.59
H D F C1,790.851.37

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Given the current crisis at Infosys, what would your investment strategy in the company's stock be?



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