Best Time to Invest – Prashant Jain

Prashant Jain, Sr. Fund Manager and CIO of HDFC Asset Mgmt company says that this is the best time to invest in the Indian market if you are looking at a 24+ months horizon. He lives by what he preaches and holds more than 98% of his assets in Equities. Excerpts from his Q&A:

  • On the Macro, U.S has a very high deficit going forward and its an over-leveraged economy which has lead to series of problems. The Indian GDP will continue to grow at atleast 6% [Worst Case] while that of US will be less than 2% or may even go negative. Once the trend is clear, the de-coupling of valuations will surface among over-sentimental analysts who have reacted in India.
  • The Good News to India is fall in global commodity prices, really especially the Crude Oil which helps bring down the Indian fiscal deficit. This will calm down the Inflation and will go back to 6% or 7%.
  • Earlier, SENSEX of 14,000 was seen as base case. however, at 11,000, this is the best time to invest as valuations extremely low.In a high growth economy like ours, these dips should be treated as a fantastic opportunity to invest.
  • How India will sail through the current Global Crisis? India’s export GDP is less than 10%. Investment of Indian entities exposed to sub-prime is very very low / nil in most cases. FDI as percentage to Indian GDP is once again very low and most of the Indian industry is dependent on internal savings. In short term, there is a liquidity crisis in the market which will be resolved. If India was facing genuine banking problems then interest rates would be rising, which is not the case. If interest rates were to touch 20% then you can expect BSE SENSEx forward P/E to touch 5 [Currently trading at 11]
  • FIIs have damaged the Indian market by sudden withdrawal. Historically, Indian institutions and investors BUY when they SELL.
  • ICICI Bank is held by all the HDFC Funds. Its Balance sheet is extremely strong and Management has indicated that there is no disruption of its normal banking activity. ICICI is the largest private insurance company and this subsidiary alone accounts for its Share Price quoted on the bourses on Friday. It is mere reputation knock that has taken place.
  • Real Estate should cool off very soon and Homes should become affordable in the next 12 months.
  • Investors should not panic and switch to Debt funds, should rather be patient and continue to BUY Equity funds with 12+ months horizon.

We do like to endorse Mr. Jain’s views and continue to recommend investing in Equities. However, don’t expect returns in short-term.

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