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Rs 1,30,000 cr money manager on D-Street says FPI tax won’t have hurt in a good market

Smallcap and midcap stocks have corrected significantly over the past few months.

, ETMarkets.com|
Aug 16, 2019, 02.51 PM IST
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Mumbai: The biggest overhang for the domestic stock market is the deteriorating macro situation globally and domestically, along with lack of earnings growth and the ongoing slowdown in the economy, says the Chief Investment Officer at India’s fourth largest life insurer by asset.

“If we were growing today and there was no slowdown in the economy, any tax of FPIs (foreign portfolio investors) may not even have caused a ripple in the market,” Prasun Gajri of HDFC Life told ETMarkets.com in an interview.

He was referring to the additional surcharge imposed on the ultra-rich in the Union Budget, which triggered a selloff by FPIs.

“It may have led to a little bit of ifs and buts, but it may not have been a big issue on the table,” said Gajri, who manages around Rs 1,30,000 crore.

“Today, it is a big issue on the table, primarily because we require some succour and support from wherever it comes from at this juncture as the slowdown is threatening market fundamentals. “Consumption spend is down and things are not looking as rosy as they should,” he said.

Concerns about global economic growth and the US-China trade dispute have triggered a flight to safety. Domestic macro indicators are not positive right now, and high frequency data is pointing to a slowdown.

The Reserve Bank of India has cut FY20 GDP growth estimate to 6.9 per cent, adding that the risks to fiscal year 2020 GDP forecasts have ‘somewhat tilted to the downside.’

Gajri said a revival in the capex cycle was the need of the hour, and it should be the investment theme under Modi 2.0 regime.

“I hope the theme is of capex revival. That is the need of the hour. We need to get the capex cycle going,” he said. “Cutting interest rates is just one part of it, so that is coming through. But something has to be done to really get it going. I hope for now the theme is largely about capex revival in India,” he said.

While smallcap and midcap stocks have corrected significantly over the past few months, Gajri is not yet upbeat on this basket.

“I think we would want to wait it out. (We are) not in any hurry to get in there, purely because in an uncertain economic environment, midcaps and smallcaps tend to suffer more because their balance sheets and size and scale of businesses are not sufficient to tide over a bad scenario if it prolongs,” he said.

BSE midcap index and smallcap index have corrected 12.8 per cent and 14.5 per cent, respectively, so far this year, while BSE Sensex has logged a mere 3.6 per cent gain.

For Calendar 2018, BSE midcap and smallcap indices are down 13.4 per cent and 23.5 per cent respective, while Sensex is up 5.9 per cent.
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