A discussion on the current state of the Indian economy with the chief executive at Karvy Private Wealth.
Strong stomach is needed to face the rough ride ahead on India's equities
Hrishikesh Parandekar, the chief executive and group head of broking, wealth management and asset management for Karvy Private Wealth, talks about the Indian economy.
What are your views and outlook on India's economy?
My own views are fairly positive, in the context that we have pretty much seen the worst, I believe. We will probably start to see, not a rapid, but a gradual climb-back in terms of both growth as well as the macro-economic picture of India's finances, from a public finances standpoint. That is predicated on a combination of the fact that the global economy, led by the US, seems to have found some stability. Europe seems to be, not out of the woods, but a little bit stabler. While China certainly seems to be slowing down, that has a fairly limited impact on how it affects India.
Are the looming elections having a major impact on foreign direct investment flows?
From a reforms standpoint, especially as it relates to foreign investments into India, I think we are fairly open. Are we seeing a lot of foreign investment? Capital investments have slowed but people don't make long-term capital investments on short-term momentum. Something like Unilever putting a lot of money into here to increase their equity holding is a very positive sign.
What do you think is going to happen with the Indian rupee?
It's impossible to predict from an investment standpoint the path of the currency. From a fundamental value of the rupee perspective, I don't think the rupee is necessarily undervalued. Definitely it is unlikely to be seen as overvalued. It just has to find its own level.
What's your outlook for the stock markets in India?
I do believe that if you see decent growth, if you see 5 to 6 per cent real growth, and you add on 6 to 7 per cent inflation on top of that, that takes you to 12 to 13 per cent. If you strip out the drag effects of some of the agricultural segments and some of the other non-corporate segments, getting a 15 per cent return is not surprising. Next year is fraught with uncertainty and it could then extend on depending on what happens with the elections. From a five-year standpoint, if I had to take a longer-term view, I would say a 15 per cent compounded growth in terms of returns of equities should be quite easily possible. The trick is to get in and stay invested and have the stomach to go through the ups and downs because we will see volatility.