Modi government has set off to a good start: Vindi Banga
'The new government seems to have got off to a good start and the proof can be seen in the confidence of the people and businesses,' says Banga.
ET Now: The government has completed 100 days. Do you think they have done all that they could in terms of setting the sentiment right globally and locally?
Vindi Banga: It is a very short period of time to assess the progress of a government in any country and I do not think we should try to do that. Yes, the new government seems to have got off to a good start and the proof can be seen in the confidence of the people and businesses. This is all that a government can achieve in this timeframe. But we will have to wait for at least 12 months more to see some real impact.
ET Now: As a long-term investor, how has your view changed on India and do you think post a clear election mandate, the Indian economy is in a sweet spot?
Vindi Banga: My view on India has not changed just because of the election result. India has been a very important investment destination - one that has to be talked about and considered very carefully. This was true last year and so it is now. Often, the investment opportunities in the micro are more important than the macro.
ET Now: The other battle in India has been inflation. How do you view this?
Vindi Banga: In my view, consumer price inflation will remain a significant challenge for India. Two big drivers are oil prices and food prices. As far as oil is concerned, not much can be done in the short term within India. In the medium term, it is important to have a proper energy policy because there are so many resources that could be developed to improve India’s own energy self-sufficiency. An example would be the dramatical change in the United States with the discovery of gas. India could achieve the same, but it will take some time.
Now, food price inflation is more of a supply-side issue. The demand for food in the country is greater than the supply. More importantly, as consumers get a bit wealthier and have more money to dispose, they want to diversify what they eat - they want more protein and better quality food. There is a shortage of all these things. This problem requires a deep thought process and a comprehensive action plan. The central government, states and industry will have to come together to create a food revolution. We need a dramatic change in the amount of food that India supplies to its people.
Vindi Banga: We are interested to invest in India, but our focus is much more on the consumer side and services, on financial services, on business services, on select industrials and manufacturing. We do not look to invest in infrastructure or defence per se. But there are many other investors who do and they are all thinking once again about India.
ET Now: What would you say about expensive valuations today?
Vindi Banga: I would not comment on one specific share, but the point is that investors usually go for quality and that is happening right now. A lot of the inflows that are coming are going after reliable scrips, good quality companies with good governance etc.
As far as valuations are concerned, these have to be always thought about in the context of the level of earnings growth. If we expect the earnings growth to step up dramatically in the next couple of years, then suddenly the valuations look more reasonable.