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market | IST

RBI’s accommodative policy lasted long, expect response to inflation: Geosphere Capital

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Geosphere Capital Management is concerned about the inflationary situation in India and therefore, expects a response to inflation, Arvind Sanger, managing partner, told CNBC-TV18. He mentioned that RBI's accomodative stance made sense during COVID but not any longer.

Geosphere Capital Management is concerned about the inflationary situation in India and therefore, expects a response to inflation, Arvind Sanger, managing partner, told CNBC-TV18.
“The accommodative policy of the Reserve Bank of India (RBI) has gone on for a considerably long time. It was needed during the COVID period, but at this point, it's not a COVID response we need, we need an inflation response. Therefore, we are looking at equities and sectors where we have a little more inflation protection,” Sanger said.
“As the economy improves, you want to manage inflation expectation from getting out of control. The fundamentals of economic growth in India are manifold, but needing an overly accommodative RBI is not an essential requirement for the recovery cycle that is coming. RBI needs to be more balanced as we go forward because the economy can stand on its own feet without needing RBI to provide easy liquidity,” he said.
On the Indian equity market, Sanger said that the market is at all-time relative premiums which indicate valuations could come off.
“The fact that the market is close to all-time relative valuation premiums to its own history as well as to other emerging markets suggests that the valuation side of the bubble, if I could call it that, could come off, not taking away from the long-term market strength based on earnings, but from short-term valuations being ahead of fundamental issues,” he said.
For the entire interview, watch the video