We have comfortably crossed the 25,000 Mark. Do you think that people still have to continue to invest in the market or do you have to wait for the GST event?
Jitendra Gohil: The market has been almost flat in the last year. We have seen considerable volatility. News flows have been pretty volatile. FPIs were the most important sellers on the market, while domestic investors simply bought shares and that is why this market remained largely flat. But continue, the feeling that different triggers are very exciting for the market. We are going to see a decent festive season this year. The monsoon has also been pretty good and the news report suggests that the rural question has begun.
The question in Tier II, Tier III cities has already started picking up and the government has also started announcing a few reforms from GST. From a macro perspective, this is a fairly good set -up for the market in the second half of the year. Secondly, we have seen the RBI cutting percentage on the monetary front now and hopefully we will see more speed reductions from RBI, because inflation is the expectations of the shooting and hopefully even the American Federal Reserve will also lower the rates in the coming policy in the coming policy in September. So all in all, we think that the government has started from a tax side, new orders have started to flow in, the monetary policy has been supportive.
What are the risks? I think that the tires between the US and India, the market, seems to bind after a year of consolidation and from the second half the market will also perform better than other emerging markets, that is a possibility.
What are things on your radar when it comes to Jackson Hole symposium? What kind of comments do you look at from there?
Jitendra Gohil: From a global perspective, where we thought that American inflation will be 2.5-3%, it affects almost 3% and there is a probability of 90% on a speed reduction. So today’s interest rates are probably a political subject in the US. If you just look through the figures, inflation is exceeding expectations, but it is still expected that the Federal Reserve will lower the rates.
The data from the labor market in the US in recent months have been weaker than expected. The growth in the US slows down. We have seen that the uncertainties guided by rates will harm the US economy in the second half. However, inflation will exceed. It is therefore a classic case of a stagflationary scenario in the US where inflation is exceeded and growth slowly slows down and it is a very difficult type of movement, but the market praises in another speed reduction, given that all this political pressure and remember that the American yields have risen dramatically. Net-Net, this is a classic case in which inflation in the US will remain higher, while there will be a lot of political pressure to see some kind of interest rates.Sector -Wise, FMCG has seen a lot of grip since GST rationalization news has arrived. Do you think that there will be more opportunities in this sector during the festive season?
Jitendra Gohil: So in FMCG the costs reduced, for example, immediately from teaphrips have started to come. There are other raw materials that have also started. So they will benefit from a margin perspective. We will see GST cuts, but FMCGS will not benefit to the extent that companies for sustainable consumers such as AC manufacturers or washing machines and car companies will benefit. From an FMCG perspective there are two ways to look at it. The national segment has begun to tackle the pace where the question momentum started. However, from an investment perspective, these shares are still very overvalued and the market takes into account that the margins of these companies are at a historic high level when the net savings interest rate of people at 40-year-old is low.
These companies are on very high margins and I think they have not passed on the cost difference. I feel that in the medium to long term there will be a kind of margin allowance, from a short-term, from the festive perspective, the costs reduce down, GST degreases have been announced so far and the question momentum is also picking up because of the festive season.
In the short term you will probably see some pick-up, but we are a little Bearish on this FMCG names from a perspective in the medium to long term. However, if I look at the entire consumption package, we are a bit bullish on the hotel segment, travel and tourism and think that more money can be earned here. Even the sustainable segment looks pretty good. In the car segment, a few companies that we like, especially with premium vehicles, four -wheelers and even premium two -wheelers do it decently. I feel that it is a mixed bag, but we prefer more discretionary companies of consumers, a bit on the premium side compared to Pure Play FMCG companies.
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