India's raging bull market may pause as evidence of profit and growth remains missing, said Madhav Dhar, managing partner of investment firm GTI Capital. That being the case, he continued to advise investors to “stay invested, stay involved”.
The market is at present in a “very mixed position”, Dhar told BloombergQuint in an interview on Wednesday. While many sectors of the economy are showing robust growth and recovery, the country will not reach a solid growth cycle until the government deals with the bad loans situation and comes up with a “sensible strategic policy” that lubricates growth, he said.
You can't really get an economic cycle going with getting the private sector credit cycle going. You can't get a private sector credit cycle going without dealing head-on with the bad loans situation.Madhav Dhar, Managing Partner, GTI Capital
Until that is achieved, the market will only see ad-hoc measures like reducing the excise duty on petrol and diesel, as it did on Tuesday. Such measures will only patch up the country's growth measures but “you won't get a full-on cycle that is needed,” he said.
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India's GDP growth fell to 5.7 percent in the first quarter of the current financial year on the implementation of the Goods and Services Tax and lingering effects of demonetisation. This was the fifth consecutive quarter of a slowdown.
Rating agencies such as Fitch and Indian Ratings, among others, have also slashed their growth forecast for 2017-18.
Speaking about expectations of some form of stimulus by the government, coming from the assurance given by Finance Minister Arun Jaitley, Dhar said: “I don't think you need a stimulus, you need a sensible strategic policy. The government's job is not to create jobs and growth. The government's job is to create the preconditions for jobs and growth.”
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He reiterated that the slow economic growth and missing evidence of profit growth do not mean that India is “falling off of a cliff”. “The picture is much more mixed.”
Dhar said he would bet on stocks in the supply chain of the infrastructure sector in this mixed market.
“The supply chain of fulfilling infrastructure projects is a big area to investigate. That's where massive amounts of government and private investment will come in starting very soon,” he said.
Defence stocks and unlisted companies are also areas of interest, while financial stocks are complicated, he added.
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