Nifty likely to hit 19000 by year-end; India reaping benefits of smart policy choices | Hiren Ved Interview

Indian equity markets have remained resilient despite both global and domestic headwinds. Even as the US and European markets have tanked 8-10%, and Nasdaq 30% so far this year, Indian benchmark indices have gained around 4% and are close to reclaiming all-time highs. Nifty may touch a fresh lifetime high of 19000 by calendar year-end, according to Hiren Ved, Co-Founder, Director, and Chief Investment Officer, Alchemy Capital. In an exclusive interview with Harshita Tyagi of FinancialExpress.com, he chalked out factors such as correct economic policy choices, no Runaway inflation, strong bank credit growth, less aggressive rate hikes, smart diplomacy on Russian crude, PLIs as the reasons why Indian markets may continue to outperform despite recession, inflation fears.

Given India’s macros at the moment, are you still positive about Indian stock markets?

The other reason why Indian markets have done well is that corporate balance sheets are deleveraged. Also, inflation is relative. While in the US, inflation has gone up 4x from 2% to 8-9%, in India, it has gone up from 1.4x. The last time Indian markets did not do well during such high inflation was because India’s macroeconomic s was not strong. The reason why inflation has surged sharply in the West is that during Covid they printed money to stoke demand as they believed that demand will slump during the pandemic. However, the demand never fell as the issue was supply chain bottlenecks. On the other hand, India never gave free money to the people, but instead worked on improving supply bottleneck issues with PLIs and other initiatives.

As the World Bank, IMF give recession warnings, how is India better placed among global economies?

India is well placed now as the government’s intervention during the pandemic was well thought and executed aimed at solving supply-side issues with reforms and not blowing up fiscal deficit. On the other hand, government intervention in advanced economies was not correct and they are paying the penalty for that now. While Energy prices did hurt India, it was not major as India diplomatically managed to source cheaper crude from Russia without souring ties with the US.

In economy and markets, there are patterns. Unlike in the past when markets crashed as FIIs pulled out money amid interest rate hikes, this time when interest rates were increased, FIIs did pull out money. However, markets did not crash as domestic savings got channeled into equity markets. Indian markets remained resilient because the sum total of all the factors was not as bad for India as it has been in the past. In simple words, there is flu in the global air, but India has built reasonable immunity this time around.

Which major factors will ensure that India remains resilient amid global headwinds and markets touch new peaks?

1. India’s own vaccines: The impact of India being one of the only four countries that produced their own vaccine during covid is underappreciated because can you imagine the cost of importing vaccines to vaccinate 1.3 billion people? Unlike China, which has not been able to fully open up three years into covid, India successfully managed to vaccinate its population with the help of domestic scientific capability.

2 Right economic policy choices: India made the right policy choice amid pandemic, the benefits of which we are reaping now. We worked on supply-side issues without stoking demand.

3. No runaway inflation: Because of the correct policy choices during the pandemic, India is not dealing with runaway inflation now. Most of India’s inflation is imported inflation because of oil prices, commodity prices, and supply chain bottlenecks.

4. Clean banks: Indian banking system was already going through a clean-up before the pandemic because of IBC, and during covid, we again took provisions and all the banks raised capital. So as we come out of covid, Indian banks, be it the public sector banks or private lenders, are squeaky clean. One of the major drives for economic growth is bank credit growth which cannot happen if banks have NPAs and no capital. Indian banks are not dealing with either of these issues which is providing the confidence that growth will sustain as banks have the ability to lend money.

5. Less aggressive rate hike: While inflation in India is above RBI’s threshold, it is not so high that the central bank has to hike rates aggressively to dampen demand.

6. India more credible and lucrative: Because of the geopolitical tensions and China policy errors during the covid, India is now becoming a more credible destination for foreign investors as well as manufacturers. It is now looked at as a China+1 or Europe+1 destination. Simultaneously, India has incentivised domestic manufacturing with tax rate cuts, PLI, and by working on ease of doing business. Additionally, with digital innovations like UPI and Aadhaar e-KYC, Indians were able to move money easily even during the lockdown.

Now that the Indian economy is recovering, demand is reasonably strong because of which capacity utilisation has moved beyond 75%, according to RBI. This along with several other factors has kickstarted the Capex cycle which can be seen from the health order books of capital good companies. While there are some sectors that are still dealing with issues like high raw material costs, and low export demand, it is not disastrous.

What is your year-end target for Nifty 50?

There is a very high probability that Nifty can hit 19000 by December-end and around 21000 by FY23-end.

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