India's equities may have turned volatile amid the coronavirus pandemic but fund manager Manish Gunwani said the market was “attractive” from a medium- to long-term perspective.
“It's an attractive market to invest in from a two-to-three years perspective. Things will be challenging in the short term. A lot of industries will see massive consolidation in profit pools, the top two-or-three players will gain at the cost of smaller peers,” the chief investment officer (equity investments) at Nippon India Mutual Fund, told BloombergQuint in an interview.
And “even if economic recovery is delayed, with low interest rates globally and better outlook on corporate profits, the stock market should do well as it is a play on corporate profits”, he said. “Corporates profits will do better than economy.”
The Covid-19 pandemic has stalled economic activity across the globe, so much so that the International Monetary Fund sees the lockdown recession as worst since the depression. In India, it disrupted an already slowing economy as the nation went into the world's biggest lockdown to contain infections. Domestic equities tracked the worst global selloff in more than a decade before recovering some losses as the government and the Reserve Bank of India announced stimulus.
For an investor who is looking at medium- to long-term perspective, one of the biggest positives would be India occupying any manufacturing space that China may vacate. “The crisis in China could be a tipping point for a lot of global multinationals to start looking at India,” Gunwani.
“If we have an ecosystem already built for domestic market, it will serve as a bargaining chip for the government to ensure that MNCs have access to these markets and we have the capacity to export,” he said. “For auto and auto ancillary, pharma API, chemicals, electronic goods, India already has the scale to build in a world class manufacturing capacity.”
Gunwani, however, said fiscal stimulus was more important than RBI's measures. “Given the shock we have seen across sectors like NBFCs, real estate, manufacturing, it's a bit of solvency problem. Debt/equity ratios might permanently go to slightly elevated levels,” he said. “The government should not only defer debt servicing but also fund some through fiscal stimulus.”
For India to do well not only from a growth perspective, but from social equality as well, Gunwani said jobs must be created and the manufacturing sector “incentivised”.
WATCH | Nippon India Mutual Fund's Manish Gunwani On Covid-19 Impact On Markets
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