Rescue volunteers carry women from their flooded homes in Kerala. (PTI)

Oil Prices, Global Interest Rates Bigger Worries Than Rupee, Says Laijawala

The correction in the rupee is only leading the Indian currency to finding its true value and investors shouldn’t be concerned, according to Abhay Laijawala.

The holy grail for a market anywhere in the world is earnings growth, and that should keep India in good stead, Laijawala, managing director of Avendus Capital Public Markets Alternate Strategies LLP, told BloombergQuint in an interview. And expectations of a 20 percent earnings growth in the next financial year seems to be realistic, he said.

The rupee has rebounded from its all-time low of below 74 against the dollar. Having weakened more than 13 percent, it’s still the the worst performing currency in Asia this year because of higher crude prices and capital outflows.

“Any move that stabilises the currency will stabilise the equity and the debt markets,” he said. Yet, that’s not the biggest concern. The big worries seem to be global in nature like oil prices, interest rates or U.S.-China tariff war, he said. Barring that, he is sanguine on equity markets.

Rural consumption remains a compelling theme for Laijawala. Small businesses would remain a key driver for wealth creation, save for short-term hiccups due to liquidity squeeze, he said.

ESG Approach

Laijawala also recommends an ESG—or environment social and governance—approach to selecting where investors should plough money. Investors tracking uncertainties such as fluctuations in the bourses and the local currency to reduce risk aren’t doing a good job if they are ignoring climate change, he said. “Climatic disruptions can have a disastrous impact on a company as well as shareholder value.”

ESG-based investments are at a very nascent stage in India. These are limited to refraining from investing in companies associated with tobacco, weapons and gambling.

The impact of a business on climate, however, won’t be the only screening factor. Alongside, a rigorous analysis of a company’s financials also needs to be factored in, said Laijiwala.

Watch the interview here