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Don’t use oaths, whether ‘by heaven’ or ‘by earth’ or by anything else. When you say yes or no let it be plain ‘Yes’ or ‘No’. –Matthew 5:34-37

30 Jan 2016


Andrew Holland, CEO of Ambit Investment Advisors spoke to NDTV Profit on markets and his expectations from the upcoming Budget.
Edited excerpts:
Your view on markets?

At present, we cannot review India on standalone basis because global events have their impact on the country as well...(this) is evident from the big outflows of foreign investments. However, February has a lot of events which can be seen as positive for markets. You have credit policy review next week and the Budget towards the end of the month. If markets are more stable globally, then we can see a decent rise in the short term. As we have all been grasping in terms of where the economy is growing and how quickly, it seems to be getting delayed and the multiplier effect in the form of government spending is taking its sweet time to come through, which is being reflected in the earnings. But the bad news is in the banking sector. Governor Rajan has not quite named and shamed all big business groups (that) have been part of this banking problem. I think the finance minister could have done a lot more for the sector. He has not taken any real action against the PSU banks and that is where a lot of problems lie. Till the time we get clear of the problems in the banking sector, there will be a phase of slow loan growth and that has a negative impact on the economy.

What can the government do to revive the banking sector?
The government can infuse money in PSU banks but unless the management has different attitude towards lending, going forward the problems will persist. Obviously, a bankruptcy code will help, but it will take some time and it has to be tested during the course. We have to see some more dramatic actions than just infusing money. It is like throwing good money after bad if you have same people in place. 
When will corporate earnings revive?
We are looking at earnings growth of about 10 per cent this year, that's our best guess and that is based on the assumption that economy will start to pick up from maybe next quarter onwards and as a multiplier effect of what the government has been doing starts to come through to the economy. But still there are a lot of problems out there which revolve around power sector, stalled projects which then goes back to the banks. I think the government needs to solve the bank problem first and maybe the rest starts to move through and we get the economy kick started a little bit more aggressively.
In the Budget, most people are expecting a push for rural economy and that will have a positive spin for consumer goods companies which had been under pressure recently... partly because they were not getting top line growth and their margins were under pressure because they are all intensively fighting for market share which is leading to higher ad spends and so on. It might be a welcome relief if there is push towards rural economy after two years of poor monsoons in the upcoming Budget.
How will Budget impact markets?
The markets could focus on the upcoming Budget. And I am sure every sector will have its day in terms of the run up to the Budget and what's expected. But if global scenario worsens from here on then even with a Budget we can't say investors' minds will be focused on India. Don't forget its global funds and not only India funds which are investing in India.
If globally something happens then that will mean we could see continued FII flows out of India.

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