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Dalal Street Voice: Budget 2022 likely to offer some sops to the housing sector: Satish Ramanathan of JM Financial
The Budget 2022 will continue to encourage Atmanirbhar and make investing more attractive, and we expect some sops to be given to the housing sector as well as it generates a significant amount of jobs, Satish Ramanathan, MD & CIO- Equity, JM Financial Asset Management – said
The Budget 2022 will continue to encourage Atmanirbhar and make investing more attractive, and we expect some sops to be given to the housing sector as well as it generates a significant amount of jobs, Satish Ramanathan, MD & CIO- Equity, JM Financial Asset Management – said in an interview with Zeebiz’s Kshitij Anand.
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Ramanathan has a rich and varied experience of around 3 decades and joins the AMC from Tattva Capital which was his entrepreneurial endeavor. He started his career with TATA Economic Consultancy Services in 1992 and has subsequently worked with ICICI Securities, Franklin Templeton AMC, and Sundaram AMC.
Q) Omicron, US Fed taper fear infuse volatility in markets. Where do you see markets in the next 12 months or so?
A) We see markets becoming more volatile than before, as inflation risks is becoming a persistent threat. Omicron is definitely an issue, yet it is too early to take a call on its impact on the Indian economy as a whole.
Our GDP growth has picked up and we have crossed pre-COVID levels in terms of economic activities. There are some other issues impacting markets as well as valuations, earnings growth, and IPOs pulling in money.
Given our valuations, and earnings growth normalizing, we are calling for 2022 to be a year of consolidation.
Corporate performance has been robust in Q2FY22, and while there are cost input pressures, we expect profits and profit growth to remain intact. There is a base effect playing out on numbers which we need to be aware of.
Q) The Budget 2022 is also a couple of months away. What are your expectations from the Budget? Do you think it will be a populist one that could hurt the fiscal math of the government which is already strained due to COVID?
A) So far, we have not seen the Budgets in recent times being extremely populist, nor do we expect it be so. Tax collections are moving up due to better coverage and compliance.
It is true that the fiscal situation has been impacted due to COVID, but there is resilience in tax collections and underlying growth is adequate to cover this.
Further, with inflation coming back, taxes in nominal terms will grow faster than initially assumed. In fact, there is room for GST rates to be rationalised/cut given the buoyancy.
There is one item of concern, however, which is increasing fertilizer prices due to energy costs going up. This may impact the fiscal math.
Q) Which sectors are likely to hog the limelight in Budget 2022?
A) In our view FY22 will be more of the same, in that the incipient recovery we witnessed in manufacturing will continue. We are witnessing robust exports in engineering goods which will sustain and expect textiles to do well.
Production Linked Incentive Scheme (PLI), China +1, and strong domestic demand will compel companies to invest in building capacities, reversing a decade long slowdown.
So, we believe industrials, textiles, chemicals, and engineering will continue to see strong growth, while the recovery in consumption will follow.
The Budget will continue to encourage Atmanirbhar and make investing more attractive. We expect some sops to be given to the housing sector as well as it generates a significant amount of jobs.
Q) The year 2021 will also go down as a year of IPOs when many niche or new-age businesses got listed. How do you sum up 2021 in terms of primary markets and your outlook for 2022?
A) We believe that 2021 was an inflection point for many businesses which was the culmination of many trends and COVID helped many of these businesses. The shift to online trade was necessitated by COVID and is likely to continue.
Implementation of GST has improved commute times of goods and this helped companies in the logistics sector. We believe that many new businesses will be created and the IPO pipeline will be robust in the future as well.
We expect 2022 to be similar to 2021 with primary equities garnering interest, and older companies needing to reinvent themselves.
Q) The year 2021 was a volatile year but bulls managed to remain in control. How do you look at 2021? What are the key highlights which stand out from a market, fund or business perspective?
A) We see 2021 as a remarkable year in which India's resilience stood out - starting with companies which managed to operate under the most adverse conditions and yet generate significant profits, to investors who increased saving and consistently put their faith in Indian equities, directly and through mutual funds, and finally, the country rolling out of one of the most aggressive and ambitious vaccination programs.
Corporate performance improved sharply as a lot of non-core expenditure was eliminated. There was some distress at the grassroots which is now receding.
As a fund house, we are confident in growth prospects as we have not grown in real terms for two years, and have been on a declining growth trajectory before that.
Q) FIIs remain mostly net sellers especially when it comes to the cash segment of Indian equity markets. How are FIIs looking at India in the light of sooner than expected tapering from the US Fed?
A) FIIs' have been an important part of the equity market flow equation, but their impact is diminishing. High direct equity participation as also strong flows into mutual funds are buffering FII/FPI outflows.
There is a general consensus among FPI participants that China offers more value than India, which has outperformed for the last 12 months.
Hence, we are seeing some selling now. Further, FPIs are also churning their portfolio and investing in IPOs by selling down their existing holdings.
We believe that FPIs' will continue to invest in India's growth story and are not concerned by lower flows in 2021.
Q) Which sectors are likely to hog the limelight in the year 2022?
A) We believe that there would a gradual recovery in manufacturing and exports and hence we are positive on these sectors. Other sectors such as insurance, autos, chemicals also hold promise.
Q) Any particular theme that remained in limelight in 2021 and could well remain relevant and in demand in 2022 as well and why?
A) Many industries exhibit long-term trends and the recovery in the chemical industry, textile industry, and engineering/auto should view as multi-year growth opportunities.
Rising domestic demand and exports along with import substitution will be the primary reasons driving these sectors.
Q) What were your key learnings from markets in 2021 which investors should take note off?
A) Our key learning from these volatile markets is that investing in high-quality businesses, and good visionary management really pays off. Successful businesses are often simple ones that run very well in a classic textbook style.
There are very few companies that can deliver this promise consistently and we need to select these good businesses and stay invested.
While this may sound simple, disciplining oneself to hold a few good quality businesses is what is the key to successful investing.
Q) What are the key risks that investors have to face in 2022?
A) There are always broad geopolitical risks surrounding the US-China relationship and its impact on global trade. Apart from this, there is the issue of rising energy prices which can cause inflationary pressures.
COVID and its variants are the main risks. Central Banks have been pro-growth and tolerated inflation longer than previously thought.
If the current benign interest rates are reversed as also liquidity reduced, the market may become volatile.
Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.
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