Sanjeev Prasad, senior executive director and co-head of Kotak Institutional Equities, comments on the outlook of Indian markets. He spoke in an interview to Bloomberg UTV today.
The benchmark BSE India Sensitive Index fell 0.2 percent to 16,843.05 at 2:55 p.m., swinging between gains, losses at least 12 times. The 30-stock measure is valued at 13.2 times estimated earnings. The MSCI Emerging Markets Index trades at 9.9 times.
On the rupee:
“Rupee depreciation should impart lot of competitiveness to manufacturing and exports but can India do the right things for growth to improve and exports to increase? We have the right policies and reasonable regulations. The important thing is to simply implement them. We just need to get down to the basics of running the country well.”
The rupee lost 0.2 percent to 57.11 per dollar today. The currency has slumped 10.9 percent this quarter, more than twice the 4.1 percent drop in Malaysia’s ringgit, the second-biggest loser among Asia’s 11 most-traded currencies.
On foreign investors:
“Foreign investors believe in the long-term demographics and like the culture of entrepreneurship here. The frustrating part is the governance issue and all discussions boil down to that. Some long-term investors, who have been India bulls for the last 15 to 20 years, are raising this question. The market hasn’t gone anywhere the past five years, and in dollar terms, it has actually gone down. That has raised question marks.”
Offshore funds cut holdings of local bonds by $1.2 billion from a record $31.5 billion reached on Feb. 29 and pulled out $273 million from equities in May, a second month of net sales, data from the regulator show.
On earnings outlook:
“The numbers have been trending down in general. When we started the fourth-quarter earnings season we were looking at 12 percent to 13 percent growth for the next two years. For 2013, we have come down to below 10 percent for the Sensex.
‘‘I still think there’s a lot of earnings risks out there, particularly for the banking sector, and the metals and mining space, where commodity prices have corrected significantly and are not reflecting in the numbers. There will be some upside as the rupee has declined. That will offset some of the decline in global commodity prices.’’
On equity valuations (SENSEX):
‘‘Valuations are not very cheap unfortunately. The broad market trades at about 13.5 times estimated earnings for 2013. That is more expensive than other BRIC nations. Both Brazil and China are below 10 times. It’s a wait and watch for us.’’
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