Talking to ET Now, Amit Shah, CEO, IIFL Asset Management, says save any major global issue, there is no reason why for next two to three years, India should not continue on the growth path with good quality companies giving double-digit returns.
Let us talk about Indian markets now. What is IIFL Wealth's analysis of the market right now in the light of how last 12-15 months have been? Are you recommending your investors to continue to be invested in the market or book some profit? How is the window looking next 12-15 months, sitting here?
If you look at the last 15-24 months' journey, most of the investors who 24 months back were just coming out of 2013-14 volatility and seeing an upswing in 2015 and 2016, are still sceptical about equities. Now we have seen in most of the HNI portfolios, equity levels depending upon their risk profile and time horizon range between 35% and 55%. Currently, we believe that is a fair allocation into equity for long-term investors. We do not believe for the next 12 months, markets are going to be a one-way street. There is going to be a lot of volatility but within that, for a long-term investor, we still believe equity as an asset class can give good post-tax risk-adjusted returns.
Any thoughts on the way the earnings season wound up? What are your strategists at IIFL telling you about how the broad growth could be for corporate India, not this year even but in FY19 or FY20? Do you see earnings growth come in a wider fashion and market also getting a booster from that?
We believe that with demonetisation and GST in place, one of the big beneficiaries will be the organised sector or the listed space. From a growth perspective, we have already seen that picking up and for the next 12-18 months, our view is that that growth trajectory would continue. Our GDP growth rate itself as an economy should be reasonably good and if that happens, obviously one would see some reflection in valuations also.
The current rise in the markets which we have seen in the last 12 months is essentially based on that particular forecast and we believe that we are right on track. Save any major global issue happening, I do not see why from the next two to three-year perspective, India should not continue on the growth path with good quality companies giving double-digit returns.
In the light of what is happening here in India in the PSU banking space, and before that, the long-term capital gains (LTCG) tax being introduced in the Budget, what is the FII community in Singapore which has India as a part of their basket, looking at these factors as a part of Indian market?
Regarding long-term capital gains, The LTCG tax according to me is not a big issue. We had it in the past also and most of the developed economies today, if you look at it, have long-term capital gains tax in their own country. So, when a global investor is investing in India with a 15% plus returns expectation, long-term capital gains tax is not going to deter them from investing here. He is investing broadly for a good macro India story.
My view is obviously it was a bit of a disappointment but it should not be something because of which FIIs would not invest in India. Our view is that flow would still continue because, with so much of global capital available and very few places where growth is being seen with reasonable consistency, India is likely to get its fair share.
Answering the first question, it is quite disappointing and the reason I say that is every time you feel India is cruising in the right direction, something like this happens and we go a few steps back. The issue is not about one company or what happened with that company or whether the company will come out of it or not, it is just about what reputation the country would carry in the eyes of global investors.
Most of the companies in India and most of the promoters in India today are pretty clean and they are doing genuine business but because of these kinds of events., question marks are put on corporate governance. So, that is something which is a bit disturbing but otherwise overall, we have been quite a resilient economy and probably in the next couple of months we will get over this issue and move on because underlying growth is still quite stable and strong.