“In a way, we are probably getting back to the way in the 1990s when the economy was driven by exports. The domestic economy was repairing before we took off in the following decade. A little bit of government spending this year will aid it, but companies will largely deliver sizable growth,” Andrade said.
India’s export scenario is improving, as China has started looking inward for growth. Moreover, the ‘Make in India’ push is also delivering results with significant expansion in manufacturing capacity.
Over the past few months, the government has announced performance-linked incentives (PLI) for chemicals, pharma and electronics companies that set up manufacturing facilities in India. The aim is to be self-reliant in every aspect and increase export volume.
“Pharma and IT will continue to dominate. Currently, 60 per cent of outsourcing is coming to India. The same is true for pharma, as Indian generics have a huge volume share in that part of the world. A number of smaller industries are also picking up the slack, be it in auto components, engineering, building materials and basic commodities,” said Andrade.
Not a fan of PSUs
Andrade said valuation is in favour of the public sector undertakings (PSUs) and if the government gets new buyers, then some part of that trend will play out. But, he is not that enthusiastic about those prospects.
“We have doubts. These companies have not been a great allocator of capital. From a portfolio standpoint, we tend to stay away from companies that do not allocate capital efficiently,” he said.
PSU stocks have come into focus in recent months, as the government has intensified divestment and pushed for strategic sale that may result in re-rating for the entire bloc. In a recent speech to Parliament, Prime Minister Narendra Modi said it was not the duty of IAS officers to run companies and said the private sector should take that responsibility.
No sharp sell-off in the offing
Andrade said ‘taper tantrum’, which refers to market reaction to central banks sucking liquidity out of the market, would happen and that would have an impact on all asset classes across the world.
“There will be volatility. In the broader context, the key question to address will be whether you will sell in that fall or reposition your portfolio,” he said.
Markets have already started reacting negatively to every rise in the benchmark yields, and analysts say when they reach the central bank targets, will make central banks to turn hawkish.
Andrade said even though stock valuations may seem stretched, there is unlikely to be a sharp selloff in the market. “I have not seen a sharp selloff following a sharp selloff. But yes, there will be a churn in the market, as new growth leaders will emerge,” he said.
