Kotak Mahindra AM on the sector outlook and the impact of Covid

SINGAPORE – Several sectors including financial services could do well in India this year if the country manages to avoid a second wave of coronavirus infections, according to an asset management company.

“If you have to look to 2021, we think the financial services, home improvement and cyclical sectors will benefit if there is no surprise on the part of Covid-19,” Nelsh Shah, managing director of Kotak Mahindra Asset Management, told CNBC.Street signs Asia” Thursday.

Cyclical stocks are those that are related to the overall economy, and they do well when the economy is growing but falter when it contracts. Examples include cement, steel, and construction as well as capital goods.

“On the other hand, if there is a second wave of infections as is the case in Europe, it is likely that defenses such as information technology (fast-moving consumer goods) and medicines will be supported,” he said, referring to stocks that provide steady returns no matter how the market performs. Stocks.

Indian markets have performed relatively well in recent months after the heavy sell-off in March. This though The economy has contracted for two consecutive quarters since April Due to a comprehensive national lockdown aimed at slowing the spread of Covid-19.

India has the second largest number of reported cases of Covid-19 in the world. More than 10.39 million people have been infected, with more than 150,300 deaths reported, according to data from Johns Hopkins University. But government figures indicate that the number of active cases is declining.

It looks like the recovery will come smoothly and smoothly, and there is improvement on a monthly basis, which is why the Reserve Bank of India may have had little time to monitor how its previous steps are being implemented.

Nelsh Shah

Managing Director, Kotak Mahindra Asset Management

The Nifty 50 The benchmark index, which is the weighted average of 50 of the largest Indian companies, rose 86% from its lowest level in March. The Sensex Index, which tracks 30 large and financially sound companies, is up 85% over the same period.

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When asked if the Nifty 50 might break the 15,000 mark, Shah said that although the momentum is now positive, much will depend on corporate earnings for the December quarter. It last closed on Thursday at 14,137.35.

He said, “If they maintain the same margin that was maintained in September quarterly, then I am sure that the upward movement of the market is possible.”

Corporate earnings for the three months ending September performed better than expected, according to Kotak. The asset management firm has forecast a strong profit recovery for fiscal years 2022 and 2023 – the Indian fiscal year begins in April and ends in March of the following year.

A pedestrian speaks on a mobile phone as he looks at stock prices in a digital broadcast outside the Bombay Stock Exchange (BSE) in Mumbai on November 10, 2020.

PUNIT PARANJPE | Agence France-Presse via Getty Images

Economic data shows signs of picking up demand in the Indian economy.

lately , The World Bank has predicted that the Indian economy will grow by 5.4% in 2021 But he said, “The recovery from a low base is matched by weak growth in private investment due to the weakness of the financial sector.”

Shah said, “The recovery seems to be coming very nice and easy. There is an improvement every month, which is why (the Reserve Bank of India) may have very little time to monitor how their previous steps are being implemented.” Adding that the Indian central bank has done “an excellent job in providing liquidity, maintaining the stability of the financial sector and reducing interest rates.”

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The last time India’s central bank lowered its benchmark interest rate to lend to banks was in May. She remained suspended during subsequent meetings Because of inflationary pressure.

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