India an attractive market despite expensive valuations
Ashok Wadhwa, Group CEO, Ambit Holdings
Sep 30, 2016 | Source: CNBC TV 18
Geopolitical situation are a bit unpredictable and clearly have direct impact on the market and the sentiment. Should the geopolitical tension continue, I guess the markets will remain a little depressed. My own view is, it is perhaps a one-off response and good sense will prevail where it must prevail so that this issue can come to an end and the markets can get back to being normal and hopefully bullish.
Our view is that the markets are already expensive very clearly. Having said that, there is so much liquidity in the world and India seems to be the one isolated destination that still is an attractive destination certainly within the emerging markets that I do not think basic fundamentals are really determining valuations today. Valuations are as much determined by liquidity and India’s uniqueness as an attractive proposition. And so long as the liquidity continues and India continues to remain a more attractive destination, you will continue receiving capital, I would believe that at every sell down, there is an opportunity to buy.
There is no debate that FY17 is a better year than FY16. What has really happened is that government’s support to direct benefit transfers is fully kicking in. What worries me even today is that with all the recovery, we still do not see an uptick in the investment cycle. Now, that is perhaps because there is already so much capacity. We need to see this demand sustain itself for a period of time before people talk about capital expenditure (Capex). If the demand continues to sustain itself, the investment cycle will come back and when the twin engines start firing, you will really see a double digit growth.
There will be a rate cut sooner or later. That is one rate cut of a relatively larger piece or two rate cuts, I do not know. But I would say over the next 12 months, a 50 basis points reduction is certainly welcome.