Expect A ‘Bounce’ In Indian Stocks In Next Two Months, Says ASK Investment Managers

ASK Investment Managers Ltd. said the Indian equities are expected to rebound in the next couple of months on fewer foreign selling and a continuous rise in domestic inflows.

“The selling intensity of foreign institutional investors is expected to reduce as they enter their appraisal cycles and holiday season,” Chief Investment Officer Prateek Agrawal told BloombergQuint in an interaction. “The third-quarter numbers, however, would not look so good as we are getting into an election season.”

The market movement, he said, is more decided by systematic investment plans and domestic inflows. “Outflows in October were more than that in 2008 after the Lehman collapse and yet, the market just lost about 5 percent.”

Indian investors are “maturing”, Agarwal said. “They saw market dips as an opportunity to invest rather than getting anxious.”

That’s at a time the benchmark Nifty 50 Index fell for the first time since 2009 in historically strong October—the most volatile this calendar year—due to higher crude prices, weaker rupee and the liquidity crisis among non-bank lenders triggered by defaults at IL&FS Ltd.

Here are the key highlights from the conversation:

Margin Contraction

• Remains hopeful on the rest of the year.
• The margins took a hit due to short-term hurdles like rupee depreciation and oil price movements. Companies can plough back margins if they are able to achieve double-digit growth in sales.

Second Half Of 2018-19

• Bullish on financials and consumer stocks due to good Q2 performance.
• Remains positive on private sector retail banks and non-bank financial companies that delivered strong earnings growth in the past.

NBFCs

• Asset-liability mismatches exist in the long-term infrastructure finance companies and housing finance companies.
• Entities will have continued access to capital if backed by a long-standing corporate house.
• NBFCs like two-wheeler finance, gold loans, microfinance can achieve 10 percent earnings growth on their own funds as they lend for a shorter duration and their books are highly liquid.

Impact Of Global Markets On India

• Current equity market is more “normal and sustainable” due to removal of long-term capital gains tax incentive.
• Markets witness more domestic inflows in form of mutual funds and fresh investors; no longer completely dictated by FIIs.
• Long-term outlook on India is strong; seen to become an exporter of capital in the next 10-15 years.

Watch the full interaction here: