India’s economic growth will still be respectable 7.50% for FY12: Tata Mutual Fund

Tata Mutual Fund expect the global economy to continue to grow at sub-par levels over the next few years due to the uncertainty over the US recovery, sovereign debt crisis in Europe and fragile recovery in Japan.

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Excerpts from an interview with Mr Amish Munshi – Head - Portfolio Management Services

What is your outlook on Indian and global economy?

We expect the global economy to continue to grow at sub-par levels over the next few years due to the uncertainty over the US recovery, sovereign debt crisis in Europe and fragile recovery in Japan. These three economies comprise nearly 50% of the global GDP.

In the backdrop of the global economic situation, we believe that India’s economic growth will still be a respectable 7.50% for FY12.

In fact, the GDP growth differential between the developed economies and India will widen mainly because of the ring-fencing of the Indian economy from global economic turmoil to a large extent as domestic consumption constitutes more than 60% of our GDP while exports contribute only around 20% of GDP.

We believe that in the backdrop of a weak global economic outlook, commodity prices should also soften, which could have a favorable impact on the Indian economy.

What is your view on the US dollar?

Primary strength of the US dollar in the recent past is due to the weakening of the Euro. Once the European crisis is settled, the dollar should depreciate over a longer term.

Do you expect more rate hikes?
We could see one more rate hike due to high inflation.

Which are the sectors you are bullish and bearish on?

We continue to like the domestic demand-centric sectors which will continue to benefit from fairly stable long-term consumption demand. The main drivers for the domestic consumption related sectors are the demographic dividend, growing urbanization (India – 31% vs. China – 49%), resilience of rural demand and low penetration levels across the consumer discretionary/non-discretionary products even when compared to other emerging markets.

We will be cautious on the infrastructure related sectors due to unfavorable interest rate scenario, dwindling sanctions, subdued business confidence and margin pressures in some sectors due to intense competition.

What advice would you like to give to the retail investors?

Retail investors should look at equity markets from a long-term perspective based on their individual risk-appetite. A disciplined investment approach through systematic investment plans (SIP) will be helpful. Don’t try to “time the market” but ensure that a reasonable “amount of time” in the market is enjoyed by your investments.

Even in the situation of high volatility, a long-term investor should appreciate the fact that the falling share price does not necessarily mean a bad thing. On the contrary, the true long-term value of any company is enhanced due to falling share prices other things remaining the same.

Source: http://www.indiainfoline.com/Markets/News/Indias-economic-growth-will-still-be-a-respectable-7.50-percent-for-FY12-Tata-Mutual-Fund/5304263965