Even as voices of protectionism and deglobalisation are growing and threatening to alter the existing norm, Sonam Udasi, fund manager with Tata Mutual Fund told Sandeep Singh that the development suits us as the Indian economy is not very outward looking. While we are connected, we are fairly resistant.
He also said that the positives outweigh the negatives for the Indian markets and over the next 6-9 months, India will figure out a way of compounding itself, Excerpts:
How do you see the Indian economy amidst the pressures of rising oil prices and talks of protectionism around the world?
Over the last five years, India has become the fastest growing economy among G20 nations. Our GDP numbers are there for everyone to see. This means that if the shocks of GST and demonetisation were not there, we would have fared even better. It also tells you about the resilience of the Indian economy and how we are structured and it is important to note that we are more inward looking.
The world is trying to deglobalise and if you hear the US President, it is clear that they are increasingly talking about their own economy and talking about tariffs. However, I think that it suits us as we are not very outward looking. We are connected but we are fairly resilient as against China. In that sense, structurally we don’t need to worry a lot, the only niggles that you have is oil. However, if you look over the last two decades, even as oil has moved sharply, India still managed to do well.
What gives you confidence that India will do well?
The macro looks fine and the micro is coming back to normalcy and the impacts of demon and GST are waning away. The April GST number stood at Rs 94,000 crore and we know that we will cross Rs 1.1 lakh crore if not now, six months later. Its just a matter of process and does not depend on the colour of the government. Once that happens, and the revenue line of India is set, it provides visibility and the confidence comes back.
India’s per capita income was $1050 in 2008 and we are nudging close to $2000 now. It took us nearly 11 years to add $1000, but the next $1000 will come in 5 years. A good government will make it in four and half years while a rag-a-tag coalition will make it in six years. As a fund manager, it will be important to see if one can you follow the colour of money that gets incrementally created and create a portfolio around wherever it goes.
There has been correction in mid and small caps, do you see value in them?
Right now, the mayhem in the market is on mid and small cap as people don’t want to get exposed and are circumspect. Once there is clarity on where the oil is headed, there will be confidence in the market. Opportunities in mid caps are slowly emerging. Seven to eight months back, from our portfolio stance, we had become more large cap focussed because value was more visible in large caps. Today when I look at it, there is still some time but we have started to become more constructive on that space. We are happy to meet management, understand their vision. Ultimately India is an emerging country and lot of wealth gets create in that space. And this sort of volatility and uncertainty is a fertile ground to hunt for a value promising company.
Recently we saw some auditors leaving their clients mid-way. As a fund manager, does this development weaken your confidence?
I think auditors need to be more responsible and there needs to be a proper way of communication. However, I see it as a good development and we will see better practices coming in as a fallout of this. This is a cleaning up process and going forward we will have lesser such issues. Now the auditors will think twice before signing a company. I think good companies and promoters will stand out going forward and meritocracy will get encouraged.
Some say markets are due for correction and some feel it will move up. What’s your take?
While oil and political uncertainty tells the market to go one side, the macro and micro GDP is telling it to go the other side. The emotion that wins will determine where it goes. My feeling is that we are already factoring oil at $75per barrel and we also know the politics is very uncertain and we are nearing the peak of political uncertainty.
However, I do know for a fact that our GST collections will move up. As economy transitions, you will have more supporting data coming up and your earnings will not have impact of demonetisation and GST, and therefore should be better off comparatively. These are signs that tell me that heading into the next 6-9 months, India (despite the political uncertainty) will figure out a way of compounding itself.
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