e-fundresearch.com: 2014 has been a terrific year for Indian equities: To what extent has the market been able to prolong its positive momentum in 2015?
Manish Shah: The year 2015 started on a strong note mainly due to continued inflows from FII’s. It corrected in March on fears of a tax on capital gains of Foreign Funds as well as shift of focus to China. Indian corporate performance has been below expectations. Consumption and particularly rural consumption is weak, as price of agri produce has not risen. Industrial capex is weak as the private sector is correcting its balance sheet and the government is on an austerity drive to rein in the fiscal deficit. In FY16 we expect a revival of capital expenditure as the government loosens its purse followed by a pick up in capacity creation by the private sector. Thus the market has moved ahead of fundamentals and will take a pause till fundamentals catch up. FY16 will be a year of consolidation for the market.
e-fundresearch.com: Comgest is known best for its quality-focused investment strategies: Does the Indian equity market offer enough room and opportunities for such a strategy?
Manish Shah: There are enough opportunities for Comgest style of quality growth at reasonable value approach. We have a universe of such stocks and are waiting for the right opportunity to invest. In the current year we were able to identify Bharti Airtel, which has consolidated for the last five years.
e-fundresearch.com: Keeping in mind that your strategy follows a clean bottom-up approach, in which sub-sectors and countries are you currently detecting the most promising opportunities?
Manish Shah: There are opportunities in the automobile space.
e-fundresearch.com: In general: What is the most important advice, foreign investors have to keep in mind when entering into the Indian equity market?
Manish Shah: Indian market is volatile and thus investors need to take a long-term view while committing funds for India. The macro in terms of inflation, fiscal deficit, current account balance has improved. We have a stable government and an able central bank governor. Interest rates are on the way down. The private sector has well managed companies. There are opportunities across all industries.
e-fundresearch.com: How optimistic is your view into the future and what obstacles and challenges should investors be prepared to overcome in 2015?
Manish Shah: The macro factors such as low oil prices have been favorable to India. The central government is acting to reduce red tape. Passage of the land bill will ease the acquisition of land for industrial use. Goods & Services Tax bill will create a single national market for goods adding to GDP. Already government has started spending in areas like railways and Power Transmission and distribution. This will accelerate to more industries as the year progresses. Risk to growth are a rise in oil along with a monsoon failure can lead to a rise in inflation and a pause in interest rate cuts. A delay in pickup of capital expenditure will be taken negatively by the markets. The private sector has still to correct its balance sheet helped by global capital inflow. A halt in global inflow will delay the process of correction.