In an interview with ET Now, Vijai Mantri, MD & CEO, Pramerica
Mutual Fund, talks about the IIP Numbers and markets. Excerpts:
ET Now: What would you make of a number 6.8%?
Vijai Mantri: The market would salute a little bit but not much because these are historical data, markets always look at what is going to happen in future. And I agree with Mr. Barua that when we look at these numbers we have own homework we do look at companies, we see things from the ground level and what kind of feeler we are getting from the companies. So, we do not rely on these data completely. However, these data do give us some signal, the direction of Indian economy. In the short term market may like this data because they have come much ahead of anybody's expectation. The guy who was giving the bullish number was close to 3%, it is a 6%-8% and what is key is that we are clearly seeing something is happening on the capital good side. It has not gone into positive territory but it looks like coming out of negative territory and that would be the key if you look at the investment cycle revival in this country.
ET Now: Would you believe that only perhaps when we can see interest rate softening and that all of these geopolitical and macro concerns fading that the situation for the overall Indian economy will be perhaps less challenging for FY12 and FY13?
Vijai Mantri: The challenge will continue to remain there, the biggest challenge as we see it that how does one revive the investment demand in Indian economy because if the investment demand is revived then you see some action happening on the manufacturing side and that is very good for the export. What we are seeing on the global factor one is definitely the Euro crisis over the time being is put on hold right now. US, we are seeing interesting data point, US would be showing some sign of recovery than what many people has expected. For India, it is one of the biggest export partner. Export, we see some in spite of recent challenges we see some sobering effect in export going back to their old days.
If you look at Indian economy we believe that April, May, or June onward you see interest rate is going down because if you have a bank CD or corporate paper available at 11.5% or 12% why do you put a plant of 5000 crore or 10,000 crore because you can get same kind of return on putting your money in the bank deposit in the corporate CD and CP. So, very clearly when the interest rate goes down there is a more incentive to put that money to the risk uses to put money for the businesses. The government can take care of couple of things first and foremost I believe they take care of coal linkages, that is a biggest concern people are putting manufacturing plant and that does not require actually parliamentary approval that can be done by the government itself. So if you ask me, I would look at interest rate, I would look at coal linkages if these two things are being take care of we would see investment revival. We see Indian economy reviving and we see market in much better shape than what they are today because a lot of global money available which would like to come to India.
ET Now: With respect to any of the sectors given that we have seen some initiatives being taken in the mining sector, do you believe that this time around it did come as a big disappointment and we might see some stability come into the numbers, any surprise figure that you are expecting to see in individual sectors going forward?
Vijai Mantri: I have not seen the data it is very difficult for me to comment that what this data mean because I just saw the numbers with you guys in front of TV screen. So we need to go back and see what this data indicate and more importantly what trend we are seeing and is this trend continue to be going there going forward which we believe on many sector it is going to be.
ET Now: A quick word on what your Sensex target for 2012 is?
Vijai Mantri: I just close to a three-four weeks back I came to your TV channel and I did mention that we clearly see 2012 may be 2013, 12 months from now the Indian equity market is going to see new highs for very simple reason that there is lot of liquidity available in the market. The ownership of the retail investor is very low and if you look at the valuation they are available at historical low compared to last 5 to 10 years level. So we believe that next 12 to 15 months market may see new highs.
ET Now: What would you make of a number 6.8%?
Vijai Mantri: The market would salute a little bit but not much because these are historical data, markets always look at what is going to happen in future. And I agree with Mr. Barua that when we look at these numbers we have own homework we do look at companies, we see things from the ground level and what kind of feeler we are getting from the companies. So, we do not rely on these data completely. However, these data do give us some signal, the direction of Indian economy. In the short term market may like this data because they have come much ahead of anybody's expectation. The guy who was giving the bullish number was close to 3%, it is a 6%-8% and what is key is that we are clearly seeing something is happening on the capital good side. It has not gone into positive territory but it looks like coming out of negative territory and that would be the key if you look at the investment cycle revival in this country.
ET Now: Would you believe that only perhaps when we can see interest rate softening and that all of these geopolitical and macro concerns fading that the situation for the overall Indian economy will be perhaps less challenging for FY12 and FY13?
Vijai Mantri: The challenge will continue to remain there, the biggest challenge as we see it that how does one revive the investment demand in Indian economy because if the investment demand is revived then you see some action happening on the manufacturing side and that is very good for the export. What we are seeing on the global factor one is definitely the Euro crisis over the time being is put on hold right now. US, we are seeing interesting data point, US would be showing some sign of recovery than what many people has expected. For India, it is one of the biggest export partner. Export, we see some in spite of recent challenges we see some sobering effect in export going back to their old days.
If you look at Indian economy we believe that April, May, or June onward you see interest rate is going down because if you have a bank CD or corporate paper available at 11.5% or 12% why do you put a plant of 5000 crore or 10,000 crore because you can get same kind of return on putting your money in the bank deposit in the corporate CD and CP. So, very clearly when the interest rate goes down there is a more incentive to put that money to the risk uses to put money for the businesses. The government can take care of couple of things first and foremost I believe they take care of coal linkages, that is a biggest concern people are putting manufacturing plant and that does not require actually parliamentary approval that can be done by the government itself. So if you ask me, I would look at interest rate, I would look at coal linkages if these two things are being take care of we would see investment revival. We see Indian economy reviving and we see market in much better shape than what they are today because a lot of global money available which would like to come to India.
ET Now: With respect to any of the sectors given that we have seen some initiatives being taken in the mining sector, do you believe that this time around it did come as a big disappointment and we might see some stability come into the numbers, any surprise figure that you are expecting to see in individual sectors going forward?
Vijai Mantri: I have not seen the data it is very difficult for me to comment that what this data mean because I just saw the numbers with you guys in front of TV screen. So we need to go back and see what this data indicate and more importantly what trend we are seeing and is this trend continue to be going there going forward which we believe on many sector it is going to be.
ET Now: A quick word on what your Sensex target for 2012 is?
Vijai Mantri: I just close to a three-four weeks back I came to your TV channel and I did mention that we clearly see 2012 may be 2013, 12 months from now the Indian equity market is going to see new highs for very simple reason that there is lot of liquidity available in the market. The ownership of the retail investor is very low and if you look at the valuation they are available at historical low compared to last 5 to 10 years level. So we believe that next 12 to 15 months market may see new highs.
Source: http://economictimes.indiatimes.com/opinion/interviews/indian-equity-market-is-going-to-see-new-highs-pramerica-mutual-fund/articleshow/12231101.cms
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