Mumbai: In an interview with CNBC-TV18, S. Naganath, president and chief investment officer, DSP BlackRock Investment Managers Pvt. Ltd, and his colleague Anup Maheshwari speak about the outlook for the markets. Edited excerpts:
So you think it would be a significantly stronger year for inflows from the domestic participation side?
Naganath: It’s been a little lacklustre since August-September last year simply because the markets did a spectacular rally in 2009; I think there is some element of profit booking, I would imagine, by retail investors. But since the beginning of January we are sensing that inflows are beginning to happen and we anticipate that trend to continue for the remainder of this year.
There is a feeling also post the correction that we have seen that valuations for the large-cap end have cooled somewhat, if not reached really interesting levels, would you go with that?
Talking growth: DSP BlackRock president S. Naganath (left) and his colleague Anup Maheshwari.
Maheshwari: Clearly, in FY11, we will see a much stronger growth relative to this year, so we are looking at 20%-plus earnings growth next year. In that sense, if you look at valuations and particularly in this correction, we do think there will be some interesting opportunities.
How do you see the markets panning out between the first and the second half, given the backdrop of global developments?
Naganath: My belief is that the first half will be choppy globally and the second half could perhaps lead to a slightly better trend. We are already seeing signs of that in the first half at least with regard to these sovereign issues, which were talked about towards the end of last year, which have come upon the markets far more quickly than anybody anticipated, say late last year.
I think everyone is familiar with the problems with some of the European countries, the deficit and the financing packages required, so that will occupy the centre stage in the coming weeks. If the financing solutions seem to be adequate the markets would be stable and if they are not then we could see a decent correction in the markets.
We have had 10% already, how would you define a decent correction?
Nagnath: In the case of Greece, in the coming week I am told that there would be better details available of the financial package put together by the EU (European Union); if they fall short of what the market is expecting then I think one could expect at least 5- 10% correction globally in equities.
Your view is that if the first half is choppy and the second half is more constructive, do you see the market heading anywhere close to its old peak by the time the year is out?
Naganath: When I say choppy, I am referring to external market conditions, especially in the developed countries, which are now grappling...with higher fiscal deficit and sluggish growth and so on and so forth.
But that would again contribute to more flows in search of growth and as we all know, from what we have seen in 2009, that will mean that more money will head towards Asia and India and that is going to be positive for our economy.