Annual Forecast FY11-12

April 1st 2011

The Third Annual Forecast Event of IAIP went on very well with power packed panelist and good number of audience. After the brief speech by the Ashish Kumar Chauhan, Deputy Managing Director of the BSE and Vidhu Shekhar, Vice President of IAIP, Anil Ghelani, Chair Programming, CE and Networking, IAIP introduced each of the panelist and invited them to take their seat on the podium. The session was moderated by Sunil Singhania, President of IAIP.

Following are the broad excerpts of the views expressed by the experts.

Abheek Barua, Chief Economist, HDFC Bank –

The core inflation compromising of food as well as manufactured goods like coal is partly structural with supply side constraints. There is concern on liquidity in the banking system with credit deposit ratios running at higher levels. Going forward QE2/3 (quantitative easing) policies of the US Fed and its impact on debt market inflows, ECBs, and hence balance of payment situations are the key factors to watch. The Indian currency should have gone to 46-47 against the greenback with increase in crude oil prices but hasn’t due to foreign inflows.

Amit Bhartia, Portfolio Manager, Emerging Markets, GMO –

Based on the global allocation exercise GMO expects 4-5% returns from the emerging markets over next 7 years. On most factors like valuations, momentum, macro fundamentals India is below long term averages. However, it is increasingly relying on foreign portfolio inflows. Real estate despite being a huge sector one hardly has good plays. Most of the promoters are not good allocator of capital. Money earned from good projects is deployed into poor ones instead of the same being distributed or shared with minority investors. The quality of data on real estate like total housing stock in the country etc is almost non-existent or very poor even in comparison to China.

Amitabh Mohanty, Head Fixed Income, Reliance Capital AMC –

The pressure on liquidity should ease and government borrowing should settle at Rs50k cr. There is seriousness on the government part to tackle fiscal deficit and it is trying to walk the talk. It is keeping sufficient buffer for H2. Still will not bet on long tenure debt paper. For corporate bonds H1 looks good but H2 needs to be watched carefully. Companies like HDFC and Tata Steel come out fixed deposit rates that raise the bar for fixed income securities. After their collapse in 2009 the market for fixed maturity products (FMPs) has bounced back again. Fund managers are looking for corporate bonds with AA- ratings and above to enhance yields.

Kunal Shah, Head Commodities Research, Nirmal Bang Commodities –

Both Gold and Silver have seen significant growth in investment demand over the last 2 years. QE2 and its roll out will be the key criteria to watch out for going forwards. In the short term gold could touch $1500 but could correct by 10-15% during second half of the current fiscal year.

Nem Kumar, Strategist & Head Institutional Equities, IIFL –

Since the beginning of the current calendar year both IIFL and Nem Kumar has been bearish on the Indian equities in general. The investment cycle remains sluggish, cost of operations and capital are going up and ROEs are under pressure.  However, there are genuine increases in economic surpluses in the rural India and hence increased consumption. Here one should be focusing on companies like Indraprastha Gas & Pidilite, which have pricing power. As the costs and wages increase companies should be capable of passing the same to the consumers. Real estate and infrastructure companies were not attractive as they are more sensitive to increase in interest rates.

Shankar Sharma, Founder, First Global Securities –

The leading indices have been masking the underlying weakness in the market internals. If one were in wrong stocks and sectors then one could have ended into negative returns over the last year. The mid-caps in general have done poorly. Most of them need capital to grow and with bear market their fund raising activity is put on hold, the projects get delayed and increased capital costs begin to hurt. Domestic consumption story has helped automobile, FMCG and few pharmaceutical companies. Real estate and gold prices have been able to hold on or are increasing due to black money flowing into these asset classes. Prefer to put money into fixed deposits or rated corporate bonds over the next 12 months.

Speaker Profiles:

Abheek Barua is the Chief Economist at HDFC Bank. Earlier he was a Chief Economist at ABN Amro Bank. He has worked in advisory role at RBI and is a member of sub-group analyzing funding issues for five year plans. He received degrees from Delhi School of Economics and University of Maryland, USA.

Amit Bhartia is engaged in portfolio management for the GMO Emerging Markets strategies since 1995. Prior to this he worked as an investment advisor in India. He earned his BE from the University of Bombay and MBA from ITM, Bombay. He is a CFA charterholder.

Amitabh Mohanty has been with Reliance Capital Asset Management for close to 5 years as Fixed Income Portfolio Manager. Earlier he was in charge of fixed income assets at Alliance Capital Asset Management. He has almost 14 years of experience. He is a management graduate from IIM, Ahmedabad and electrical engineer from IIT, Roorkee.

Kunal Shah heads Commodity Research at Nirmal Bang Commodities and has been closely tracking bullions, metals, energy and agricultural commodities for the last 5 years. Before this he was managing the research desk at Motialal Oswal Commodities. He is B Com from Mumbai University.

Nem Kumar, a CA by qualification, is a Strategist and Head of Institutional Equities at IIFL. Prior to this he was Head of CLSA India. He has more than 14 years of experience in the equities and 8 years in a large oil company.

Shankar Sharma is a Dean’s List MBA from Asian Institute of Management, Manila. He started First Global about 20 years ago and globalised its operations to international markets.

Leave a Reply