In an interview with Nishant Kumar of Mint Genie, Vijay L Bhambwani, Head of Research - Behavioural Technical Analysis, Equitymaster, said that the Indian economy will reap the benefits of captive consumption and demographic dividend.
The economy is showing signs of stress thanks to the Russia-Ukraine war which has shot up the commodity prices and there is also Covid-induced pain. What are your views on the country's economy in the medium term?
In the near term, India will undergo what the entire global economy will experience such as supply chain disruptions from the Covid era, inflation triggered by the Ukraine war. GDP may contract marginally due to price rise. However, we will continue to outperform many large economies due to our captive consumption and demographic dividend.
To what extent will commodity price inflation hit India's earnings in Q4FY22 & Q1FY23?
Each sector will bear the brunt uniquely. Plastics and fertilisers, for example, will probably be the worst hit due to raw materials (petrochemicals) shooting through the roof. Exporters on the other hand stand to benefit from rising prices. Net-net, the effect may not be as negative as it is being perceived. Let us not forget a similar situation prevailed in 2013 as well. We came out of it fairly well. This time too the impact should not be long-lasting either.
The rate hike regime is looming. Can US Fed's rate hikes trigger an RBI rate hike in April?
Even if the RBI's MPC hikes rates, the magnitude may not be much. Rather than biting the bullet in one go, I believe the RBI may stagger rates hikes. Also, our interest rates are well above most large economies anyway. So, we don't have to raise rates along with US Fed in lockstep.
What target do you anticipate for Nifty by the end of 2022?
As a short-term trader, I wouldn't venture targets 9 months out in a year laced with geopolitical uncertainties.
What sectors are betting on at this juncture? What are your preferences and what is your rationale for investing in those sectors?
I will bet on the technology sector which is relatively insulated from supply disruptions, FMCG because consumption cannot fall beyond a point and the generic pharma sector due to demand inelasticity.