Indian market was a late starter in this rally, but it has caught up well with other global counterparts, said Alok Singh, CIO, BOI AXA. He also spoke about growing FII interest in India during an interview with ETNow.
What are your expectations of the markets? Look at the last two days. We had a terrific Tuesday, we are building up on that momentum ahead of the elections. This is being mirrored on Bond Street and Mint Street. That is the biggest takeaway and that is why perhaps the Bank Nifty is reacting the way it is.
Yes, Indian market was a late starter in this rally. If you look at the global market, the rally started at the start of the year and we had our low point for the midcap index somewhere in February.
Since then, we have seen India catching up with the global trade which started at the start of the year, primarily triggered by what is happening globally and some price correction. There are a few things emerging globally, which are making this happen. One is everywhere, including India, you are talking of a dovish central bank, you are seeing an inflation which is quite low and controlled so. The earnings are not that ugly.
You are getting a mix of a good things, which are leading to market confidence coming back and we are seeing FII flow happening over this period as well, which is strengthening.
And yes, it can be attributed to some amount of pre-election rallies that we have seen in the past, but these are all hindsight analysis. Why it happened? Fundamentally, it is about macros, inflation and earnings being okay. In such cases, markets do have a tendency to overshoot the fundamentals. I will not be surprised if we see a further rally from here.
Give us a sense of how are you reading into FII inflows for March that have been particularly very very strong. Do you think it is a trend that is going to sustain over the longer period?
Yes, you cannot look at March in isolation. You have to go back slightly in history. Starting two years ago, when the US economy started looking better, there was repatriation of lots of dollars globally to the developed market and obviously, that money went out of emerging markets.
And as we are seeing stagnation and the talks of recession emerging somewhere — though I do not agree with the recession point so early — certainly you are not seeing a growth which we had seen last year. Hence, the reallocation or the rebalancing has to happen.
The emerging markets have been the beneficiary of that and with India recently placed in that pack, India is getting its own share of it and I think with RBI also playing a role in terms of stabilising rupee dollar to a great extent, it is helping. It is a mix of all. FII flows will continue going forward as well.
We want to understand at a time when everybody is talking about the rural push and consumer sentiment being the focal point of the government. What makes you bet on the industrial space, what is your view on the capex cycle, what is the kind of levers that you are spotting at this point which could actually take the industrial companies and stocks to the next level?
If you look at industrial space, it is a very generic word and it will include capital goods companies as well as many others. What if you look at our portfolio, what we are concentrating is more on the consumables and intermediaries. Why we are positive on that is because increasingly we are talking about capacity utilisation on the higher side.
For most industries, people are talking about augmenting capacities going forward, some have started working. If we go back somewhat back in history, there was a time where the capacity utilisation was in 50s, now we have moved towards 80s and I think that is what the basic play was.
As you increase your capacity utilisation, the intermediaries and the consumables do better. With the capex coming in, the chance of that earnings upgrade in this sector increases further and I think that is what we are betting on.