Contrary to commentary from most market participants, Mosaic Asset Management's Maneesh Dangi says ongoing slowdown in India's economy is not short-term and will likely last for another year and a half.
"We are in the midst of cyclical slowdown in the economy and it is totally expected that relative to bullish expectations, majority of things will be disappointing," the chief executive officer told NDTV Profit.
The slowdown has been reflecting in the last two quarters of corporate results, according to Dangi. He explained that these slowdowns tend to drag on for five-seven quarters and they never recover without a solid assistance from policy stimulus or some external support.
"The template of slowdown and recovery is fairly known, historical and recurring," he said.
The likelihood of a major fiscal splurge is very low, he said as the government is tied to variety of things like global consensus around further fiscal stimulus, public debt to GDP has not rolled down after Covid stimulus, and Delhi FDs have to be brought in as promised.
Unfortunately, RBI's hands are also tied given the currency scenario, he said. "It is unlikely that an emerging market cuts rates, when its currency is being attacked."
But, liquidity easing by way of variety of instruments is a soft regulatory wind and that should ease little pressure, but something dramatic should not be expected, Dangi said.
Super pessimists are always wrong but super bullishness is also not right, he said. He expects the Indian economy to grow by 5.5-6% in the next 5-10 years. While big picture growth is alright, Dangi sees near-term cyclical slowdown.
Corporate results, according to him, are surprising in the middle of a slowdown, as margins until about two quarters ago were very elevated. "So, therefore, in cyclicality, its very difficult to imagine that margins will be as elevated as they are, when economy growth is so sluggish," he said.
He does not expect margin expansion in the current macro setup.
Among sectors, while banks are better priced today, they're struggling at margin level as the source of rapid credit growth is slowing, he said. Manufacturing, especially tradable, is expected to see major deflationary pressure if US were to erect tariff.
Dangi is bullish on IT as firms are agile and could be a great beneficiaries of AI robotics race between US and China, but there will be collateral damages.
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