A number of positives supported a 18% earnings growth during FY20-24. As a result, markets also performed very well, said Shridatta Bhandwaldar, head of equities at Canara Robeco MF. He tells Ananya Grover that investors should temper expectations and stick to conservative equity products. Excerpts:
ALSO READIndia’s personal income tax collections now bigger than corporate tax mop-up 1. What will be the impact of 50% tariffs on Indian equities?
The way the US administration has been operating, you can have a sudden change tomorrow. It depends on how the Russia-Ukraine war gets resolved, at least in case of the additional 25% tariffs. As a base case, a 20-25% tariff is going to remain at least for next six months and so on an annualized basis at least 25 basis point of impact on GDP is expected. Additional 25% over the next two quarters will go away because it is not sustainable even from an importer’s perspective. One of the silver linings we see is that commodity prices will remain in check and that is positive because we import a lot of commodities, particularly the energy side. Second is that if the US keeps behaving this way eventually a lot of investors including central bankers will have to think about how much allocation is to be made to the US and people will think about other geographies in terms of incremental capital allocation.
2. Will India benefit as it is the least preferred Asian market now?
That is because our valuation has relatively been on the upper side and the earnings have been on the sideways for the last one year. If the corporate earnings come back in 2-3 quarters, all the FIIs will come back because there is no structural challenge. The government balance sheet is okay, current account deficit is okay, macro-economic stability is good, inflation is under check, there is no currency related issue. The only challenge that we have is growth versus expectation. Between financial year FY20 to FY24, we had 17-18% earnings growth because government capex, real estate and bank credit cost worked in our favour. It could have continued had the private capex and private consumption started moving forward. Since the capex moderated from Govt side and private consumption has still not moved above average; Nifty earnings moderated
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