Let The Bubbly Flow

Post-2008 Lehman Crash, India has emerged as a leader as being the first country to recover from the global crisis. In our opinion, the India Growth Story is intact as it is led by domestic consumption backed by the government’s agenda of inclusive growth. The results are reflect-ed in the appreciation in the stocks of FMCG, consumer durables and automobiles. 

In the last 18 months we have seen the auto sector moving into top gear. The stocks of consumer durables have witnessed good amount of appreciation and the same can be said for FMCG stocks too. Now the world is looking at the India Growth Story keenly, particularly the European countries and the US, who are looking for participation in this upward movement, mainly due to two reasons i.e. domes-tic consumption and the low cost of production. 

We feel, this is the right time for the world to look at India on a larger canvas. If we look at the debt-to-GDP ratio of India it does not find a place even among the top 20. Thus, we can safely say that the country is now completely immune to any global meltdown. Going forward, in the cur-rent price-to-earnings ratio of 15-16 times is very much compelling and we may see an appreciation of 50 per cent in the next 12 months. As for the recently concluded results, the better numbers across the board reflect the fact that measures taken by the central government are yielding positive results as have been seen in the corporate results. 

In all likelihood, this growth momentum may be sustained. The last fiscal took off with high fiscal deficit and in the beginning of the new fiscal 2011 the government has come up with the 3G auction that has helped it raise more than Rs 67,000 crore while another Rs 30,000 to Rs 40,000 crore is expected from the BWA auction. With the disinvestment plan of Rs 40,000 crore, the government’s kitty is likely to swell by Rs 140,000 crore and this will help ease the fiscal deficit to a large extent, providing it with the required breathing space. The money, if spent on infrastructure, will surely boost the GDP growth.

Till today, we have seen inflation rise to a significant level backed by food inflation that the government couldn’t control. But now with the coming of the new season, the food inflation may come under control. I completely agree with the Finance Minister’s view that inflation will be in the range of 5 per cent. 

As for the interest rate scenario, I do not see any rise for the next one quarter. Going forward, domestic consumption picking up pace is likely to be one of the main triggers. Better corporate earnings will add to this booster dose for the markets. Also, the government will now be in a more comfortable position given the huge income recently generated. We are bullish on sectors like FMCG, consumer durables, metals, mining, PSU banks, shipping and infrastructure. We are specifically bullish about the stocks of IDBI, IFCI and Tata Steel. For investors, I feel that this is the ideal time to enter the market but the only thing that has to be kept in mind is that they must subscribe to research.