After global central bankers, including the Fed, sounded dovish, money is flowing into emerging markets. Will markets become volatile or show some resilience going forward? Speaking to Bloomberg TV India, Axis Asset Management Managing Director and CEO Chandresh Nigam says dovish outlook of central bankers, coupled with domestic factors, including the Budget focus on infra spending and rate cuts on the small savings, is positive news and help in consolidating the India growth story even further.
Markets seem to be in fairly consolidated and stable mode particularly after the actions of the major central banks. What are you watching out for in near-term triggers going ahead?
I think the big move, especially after a very positive or dovish outlook painted by the Fed, is that globally money is moving into risky assets once again and emerging markets are doing very well post the sharp January sell-off. Markets are consolidating. So from that perspective, it looks like money flows into the emerging markets. Flows into EMs, which have been relatively weak for the last two-and-a-half years, might reverse this year and this would be very good for markets. So I think that is one of the key things I would watch out for. Markets have turned around on the back of very strong foreign buying. And if that continues, which essentially is driven by outlook of the fund managers towards the emerging markets, I think we are set to see some reasonable consolidation or maybe a further rise ahead. So that is the key issue. The other positives, which have already happened, is whatever came out of the Budget and then further rate cuts on the small saving side. I think they are all positive news and would certainly help to consolidate the India growth story even further. But eventually everything depends on global risk-off or risk-on mode, which for now, after the Fed statement, does look reasonably positive for the rest of this year at least.
There is some disconnect in listed stocks compared to what we hear on the inside of the economy. We have the Waterways Bill in place, the government committing a huge amount of money on infrastructure. How does one play all this in the listed companies in the infrastructure space, which doesn’t seem to be getting traction?
I think you are right. The entire investment demand story will continue to remain weak. There is a lot of intent, which has been shown. Some of it we saw in the current financial year in terms of expenditure on railways and ordering on the highways front. But it is not strong enough to make all companies in the investment side of the economy really start to do well. I think there will be pockets emerging where you will be able to play on some of these businesses. I think highways are one of the first areas related to that. Wether it is the infrastructure owner or the contractor, they will certainly start to do well. There are not too many of them. Many of them have lots of other businesses as well. So it may not be reflecting immediately in this financial year in the overall numbers. So there will be a few companies, which will be beneficiaries. But as I said there is a relatively weak investment demand situation in the economy. So we cannot expect anything major happening there. The expectation would be that over the next 12-18 months, as business confidence improves on the back of slow recovery in the economy, you would see the benefits or the sentiments percolating down to people making investment decision and then maybe more number of companies would participate. And then there will be the tertiary impact as growth picks up as infrastructure spending moves up. You will definitely see employment generation that will lead to higher consumer demand. I think it is a slow story. Nothing will change immediately. And I really feel it is an 18-20-month job. That essentially is a story of India if you look at it.