Arindam Ghosh of Mirae Asset Global Investment Management (India), believes the Indian stock market will remain volatile in the coming few weeks due to concerns over global oil prices and high inflation. Ghosh says there is no quick solution really to pull down inflation overnight but actions by the RBI could lead to some moderation. He is bullish on the oil stocks particularly of few upstream oil companies. In an exclusive interview with NDTV’s Prashant Nair, Ghosh discusses the overall financial market condition and expectations ahead.
NDTV: The recent few weeks have been quite jittery for the stock markets. Are we heading back to January lows?
Arindam Ghosh: I think it is difficult to take a call on where markets are headed but certainly volatility is going to be the order of today and tomorrow. I think we have a very choppy period ahead of us. Clearly, there are concerns at macro level that revolves around oil, inflation and high interest rates. Till there is a clear direction where these broad indicators are heading, we would probably in for some roller coaster ride in the coming period.
NDTV: So you don’t think the markets heading back to January 22 lows?
Arindam Ghosh: It is tough to take a call on that because there are many factors which may lead to a situation where we may see a protracted period of downturn. One such factor is the crude oil prices remaining at higher level for some time now. And if there is an increase of $1 per barrel there is an inflationary increase of about 25 basis points. Also if oil prices consistently hold above at $120 a barrel level then we could see prolonged period of uncertainty.
NDTV: So, what’s the situation at Mirae Asset India?
Arindam Ghosh: We are fully invested at the moment because clearly as a fund now we believe our task is to pick stocks. Whilst we do look at macro economic environment, we don’t let our stock picking decision to be under its influence. Our job is essentially to build a portfolio of quality stocks and that is what we are doing through strong in-house research team.
NDTV: What kind of stock are you looking at?
Arindam Ghosh: We actually have been trying to focus on stocks which we believe are long term bets. In terms of strategy we follow a market neutral strategy, therefore, we pick in our portfolio the stocks that are more immune to oil and inflation shocks.
NDTV: Is inflation a killer according to you?
Arindam Ghosh: Inflation is definitely a concern not only in India but worldwide. I think if inflation stays at the level of above 7 per cent, it will be worrisome for policymakers and decision makers.
NDTV: Do you think inflation needs to come down drastically for markets to start move up again?
Arindam Ghosh: Clearly, we feel that inflation has to come down. It is surely not sustainable for any economy for a long period of time. I am confident that policymakers would take decisions that are required to moderate inflation. There is no quick solution really to pull inflation down overnight but actions by the RBI could lead to some moderation.
NDTV: What is level of rupee that you are comfortable with?
Arindam Ghosh: I believe the weakening of rupee is going to persist for some more time primarily because of high oil prices and its impact on current account. Going forward I believe that the pace of the rupee’ weakening will slow down considerably. This year we could see rupee continue to remain weak.
NDTV: What kind of stocks would you play with?
Arindam Ghosh: As a fund house we are great believers in contrarian strategies. Clearly, we decided to take a contra bet on the IT sector some time back and we moved quickly from an underweight position to an equal position. I think the sector therefore has performed extremely well. We also have taken positions in pharma and textile sectors.
NDTV: How would you play oil stocks?
Arindam Ghosh: We are very bullish on the oil stocks particularly we like few upstream companies. These are long term bets and many of the oil stocks are looking extremely attractive.
NDTV: Are you comfortable with the price the commodity companies are going for? A lot of people now believe that we may be at or perhaps near the commodity cycle peak?
Arindam Ghosh: Our view on commodity is guided by a simple logic that demand is far in excess of supply. Hence the demand for commodities is clearly on the up. We have filed with the regulator for a commodity stock fund and once we get the approval, we would like to come with one.
NDTV: Do you agree that new fund offerings are becoming increasingly difficult?
Arindam Ghosh: I think you always have the situations with volatile markets and changing investor sentiments, so you can’t predict when or what exactly going to influence these situations. Post January 22 the investor sentiment has been at an all time low, thus, impacting a lot of funds.
NDTV: What are the FIIs doing right now?
Arindam Ghosh: I think nobody disputes that India is a long term growth story and the current situation is a short term aberration. Everyone understands that India is one of the most diversified markets even within the emerging markets space. We have already reached a stage where the dust is settling down in the US and so we could see increased allocation of funds to India.
NDTV: What would Mirae Asset India would be doing different to garner investor attention?
Arindam Ghosh: Though we may be the late entrant here but if you look at maturity curve, we are still at the beginning. We see a lot of opportunities across markets and newer customer segments. We would be aggressively pursuing our business expansion plans. Based on in-depth experience of Indian market, we believe that we would be able to offer right products and build up an impressive track record. Also we would like to chase any merger and acquisition opportunity where we see value.