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Global events to be a near-term overhang: Sonam Udasi

Jinsy Mathew/Mumbai 28 Jun 12 | 09:42 AM

Sonam Udasi, senior vice-president and head (research), IDBI Capital Markets tells Jinsy Mathew that while structurally things are slowly falling into place with oil prices cooling off and Indian markets getting cheaper in dollar terms, its policy action on reforms and encouraging investments that will revive the economy. Edited excerpts:

How do you see the Indian markets panning out in the next few quarters?

India is passing through a tough phase where it is facing growth challenges at home in an increasingly risk averse global environment. The markets are likely to reflect this in the coming quarters with increased volatility. While structurally things are slowly falling into place with oil prices cooling off and the markets getting cheaper in dollar terms, the risk of global events will continue to be a near-term overhang.

Do you think the structural growth story of India is waning?

India's demographic dividend continues to be a huge advantage. We are still amongst the fastest growing economies globally. This structural strength is just looking for the right stimuli to encourage investments. Also, with crude coming off, the fiscal situation should improve going forward.

Do you expect any critical announcements from the EU summit on Thursday that can move the markets either ways?

Our assessment suggests that the summit will not be able to offer any long standing solution, considering the stalemate in ideas between German and non-German votaries. The markets are already going into this event with low expectations.

Will the recent announcements help revive the Indian economy?

The announcements were positive, but largely pertained to stabilising the currency. Policy action on reform and encouraging investment will enable sustained revival of the economy.  

Do you think Rupee could make new lows due to global risk?

The depreciation is quite possible. Technically, the Indian currency will continue to remain under pressure as the macros remain weak. Also, the relative attractiveness of Dollar against every other currency will continue as long as the Euro troubles persist.

Which are the sectors/ themes which are attractive in the current scenario?

In this globally risk averse environment, the investors would do well to focus on bottom-up investing in quality companies that are trading below their intrinsic values, rather than focus on a sector/theme. There is value in some PSU banks, power related companies, non-ferrous companies and mid-caps in appliances sector.

The foreign institutional investors (FIIs) have remained net sellers this month though not much as what they sold compared to the last month. What are the factors that can make FIIs remain invested?

After the aggressive inflows in the first three months of the calendar year 2012, India has underperformed. At the same time, world markets too have not given any great returns. However, considering the demographic dividend of the country and the current low level of FII India related allocation, remaining invested should not come as a surprise. But what we should focus on is credible improvement in the macro scene to make India an attractive investment destination, both for FIIs and FDI. Failure on this will continue to bear on global investor sentiment and thus, Indian markets.

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