“India has suffered no doubt but the consensus EPS estimate is down about 6-7%. In north Asia, things are down anywhere between 25% and 30%. On a relative basis, even though India underperforms for about a couple of quarters, the longer term attractiveness of the market cannot be taken away,” says Manishi Raychaudhuri, head of Asia Pacific equity research, BNP Paribas NSE -0.43 %.
What is your India trip agenda, meeting clients, meeting companies?
Meeting clients. We had an internal event over the weekend and a bit of meeting senior economists and policy experts as well. So it is a combination of all these.
What are the feelers that you are getting from there because India has managed to survive amidst this global selloff that we have seen?
Absolutely. One particular aspect is clear clarity and conformity of thoughts that India is at the cusp of the re-emergence of growth cycle which is possibly visible in the kind of non-food credit growth that we are seeing in the range of 15% to 16% which was hardly about zero to 1% about 15 to 16 months ago.
The banks have the cleanest balance sheets possibly in a decade. The corporates are also borrowing. A few groups have relatively deleveraged balance sheets. The average debt to equity ratio is about 0.5 which is supportive of both consumption and investment cycle. Having said that, we still have problems. The biggest is possibly the so called K-shaped recovery which economists talk about and which is keeping rural and second, third tier city consumption under check.
That has been a common concern that we heard particularly from the consumer staples companies. But if you look at the so-called affluent consumption which let us say the four- wheeler companies or other high-end corporates cater to, they seem to be doing fine and indeed that is one of the reasons why that has been one of the investment themes that we have been recommending to our clients.
But do you put fresh money to work because all themes that you have talked about were the first to recover from the Covid lows and we all know the kind of rich valuations those pockets are currently sitting at?
Valuations are one of the common concerns. It is kind of a common refrain that we heard from the domestic clients and they are in a quandary because many of these investors, the domestic institutions are constantly getting flows and a huge quantum is available through the SIPs.
And the mandate is to be fully invested…
Absolutely. They cannot sit on cash for too long and the mandate is to put in money, so they are looking for reasonable valuations in some pockets but the concern is that we are not getting ourselves into a value trap. There are some sectors which are still trading at discount to their long-term historical averages. There is the commodity space, metals and mining space and now the expectation is that if China revives in some manner, maybe that space which had been languishing for a while, would revive as well.
Read more at: https://economictimes.indiatimes.com/markets/expert-view/is-it-going-to-be-sell-india-and-buy-china-in-2023-manishi-raychaudhuri-answers/articleshow/95655638.cms
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