India on a strong macro footing despite global chaos: Rupen Rajguru

Time of India

15 hours ago

"So, from a global setup, while US earlier fears of recession does not seem to be coming true, but there is definitely going to be some slowdown and in a way from India perspective, what I believe, as I said, the stars are aligned and the
earnings growth
which witnessed a little bit of slowdown sometime in last third quarter or so, we believe is now going to pick up. So, what we believe that we are in a very good wicket as we speak," says
Rupen Rajguru
,
Julius Baer
.
What are the macros on the table right now if one has to really understand from the global as well as domestic perspective? India-US trade deal optimism definitely is working in the market so far. We also have earnings season coming up. It is already there on the cards as well. But having said that, the crude prices and overall optimism which according to your analysis if you could just help us understand till how long will it remain and how are you reading the markets keeping all the macro factors in favour in India?
Rupen Rajguru:
So, in the current context, I would say chaos is a feature and not the bug in the current context. Having said that, from an India perspective purely if I were to see, the macro really looks pretty good simply because A) if I were to look through the balance sheet of the government, also balance sheet of the banks, as well as corporates, all are in a very healthy state, and the issues which we were facing sometime middle of last year wherein the government spending was not coming through and
RBI
was a little bit tight on the regulatory side, both those issues are receding. And because of those two issues, we saw the earnings of the
India Inc
coming down. But what we saw from the fourth quarter and what we believe this year also it would continue, the earnings momentum will again restart in India.
Having said that, the key concern which has been haunting not only Indian but the global markets is, how the global macros will shape up. And incrementally, what we are seeing that while there has been a lot of debate about the impact of, the first of all, the reciprocal tariff and in what form and shape it will be taking place, but one thing appears to be clear that the rate of growth specifically in the US market is definitely going to slow, the dollar is going to be weak, and probably some of the other parts of the world so be it Europe, be it some of the other emerging markets definitely are going to do better.
So, from a global setup, while US earlier fears of recession does not seem to be coming true, but there is definitely going to be some slowdown and in a way from India perspective, what I believe, as I said, the stars are aligned and the earnings growth which witnessed a little bit of slowdown sometime in last third quarter or so, we believe is now going to pick up. So, what we believe that we are in a very good wicket as we speak.
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Moving to the sectoral approaches, we see a lot of sectoral churning. A day comes when the banks are doing really good. Then, we have metals shining and this sectoral churning is up and here to stay. What are the sectoral approaches and which sectors do you feel are doing good these days?
Rupen Rajguru:
So, as you are right, if you look market on a daily basis, there will always be some action somewhere. But from our perspective at a structural level, considering India as a structural story, we definitely like two-three broader bigger themes. So,
BFSI
being one of them because that is the best way to play the entire India growth story and if I were to just put it in a very simplistic way, the best way to play India is through BFSI, consumption, and through capex, so that is the best way to play India.
In the current context, what we have seen is that A) the way the RBI has completely gone, I would say, the bazooka which it has given in the latest credit policy through direct means like rate cut,
CRR
cut and OMOs and forex swaps in which they have infused massive amount of liquidity in the system and liquidity which was negative is now into surplus and indirect ways by way of lowering down the regulatory bar in some of those measures, which they had done tightening last year. The focus is clearly going to be growth.
So, in an environment with rate cuts and easy liquidity and lower inflation, NBFCs tend to do well and for that matter all the wholesale funded financiers also tend to do well. So, we like NBFC as a segment. Secondly, also in an environment where finally now we are seeing rates getting lower and banks also are cutting their fixed deposit rates, so some of the products on the insurance side, some of the savings product or the non-par products we believe will come back into reckoning.
So, another segment within the BFSI which we like are the insurance companies and there again what we are seeing if I were to look back for last three-four years, a lot of the insurance companies had seen a de-rating because the regulatory environment was also pretty tight out there, that we believe is changing and secondly, as I said some of the savings or the non-par products which are a very high margin product for the insurance companies that will come back into reckoning and we believe some of the players are in a good position to capitalise on that.
So, with the earnings growth also coming back and the de-rating done and there is a possibility of re-rating, so insurance companies, we believe are better placed, so that is the other theme which we like.
I would say, rural recovery, the rural economy is we believe is doing well and the rural consumption we believe will come back simply because now the inflation is lower, so for the first time after a long period of time the real wage growth rate in rural is positive.
The monsoons are good. There is record production on the food side, so that should aid that. So, rural recovery is a good theme. So, some of the sectors related to that be it two wheelers, be it some of the retailers, and all we expect them to do well.
I just want to know any particular theme or story which could be a dark horse, which is there on your radar so far. No calls taken on those lines yet, but definitely you are tracking it down for further strategies.
Rupen Rajguru:
Look, the way the market is, frankly there are not many so-called dark horses. So, if I were to purely look at, if there are any contrarian bets, I would say some of the low-ticket consumption item which is again linked to the rural theme which I said, but those segments are completely beaten down by the market.
So, some of the companies on the home improvement side, while the real estate cycle has been strong but the home improvement companies, stocks have struggled. So, some of the tile companies, pipe companies and all have not done that well and some of the low-ticket consumer discretionary items also.
So, be it the footwear, luggage, all have not done that well, so that can be something which clearly can potentially be dark horse because while the earnings growth has not been there, but we believe there would be earnings growth and those stocks have done nothing for last couple of years or so, there can be some potential value emerging out there.