Manish Jain, Fund Manager, Ambit Asset Management, explains that as the earnings season begins for Q1FY21, the pressure on stock prices will increase, during an interview with Himali Patel.
The government of India in conjugation with regulators like RBI has been fairly proactive both in terms the lockdown (to save the lives of people) and trying to minimise the economic impact. The 75 basis points (bps) rate cut by the Reserve Bank of India (RBI) and repayment moratorium extended by banks should help MSMEs manage the cash flow situation much better. The DBT benefits extended to the masses will help elevate their financial distress. So, the government has done a lot to minimise the economic impact. However, a lot remains to be done.
The volatility in the markets is going to stay. The true economic and financial impact is yet to be seen. As earnings start coming (especially Q1FY21F earnings) the pressure on stock prices is likely to increase. However, at the same time we also expect a strong pull back from the markets once the situation starts normalising. Investors can expect to make good returns in the next six months. The only thing to keep in mind is that the solvency situation of the company should be sound, management good and corporate governance clean.
Indian markets are fairly insulated as far as global markets are concerned. We are a fairly inward looking economy and that should help. The endeavour of the government over the next few years would be to make India as self-sufficient as possible. We would expect a strong push to the Make In India programme.
We expect most of the businesses to go into a cash conservation mode in the near to medium term. Current situation will shift focus away from growth to survival in the first phase and loss minimisation in the second phase. Hence, at least for the next 12 to 15 months, we expect no major capex from the corporates across sectors.