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    Bottom could be in place but big economic recovery still some time away, says Kotak’s Sanjeev Prasad

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    Bottom could be in place but big economic recovery still some time away, says Kotak’s Sanjeev Prasad

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    If you look at all the 3 major components of GDP, which are private consumption, investment and government spending, I see challenges with all of them, said Sanjeev Prasad, MD, co-head, Kotak Institutional Equities.

    It is possible that the bottom will be in place as far as economy is concerned but not too sure if we will see a big recovery from where we are is the word coming in from Sanjeev Prasad, MD, co-head, Kotak Institutional Equities.
    “If you look at all the 3 major components of GDP, which are private consumption, investment and government spending, I see challenges with all of them,” he said.
    “Private consumption in household income has been a big problem for the last few years. The government spending will be curtailed by the fiscal challenges which we are seeing now and on the investment side there are challenges with balance sheets. So of 3 major players – government, household and the private sector, I am not sure what will be the big recovery. So, bottom will be there but we should assume that we won’t see a big recovery for some time to come,” said Prasad in an interview with CNBC-TV18.
    When asked about his expectations from the upcoming union budget, he said, “We should stop assuming that too many things will come up in the budget. Ultimately, it’s just a presentation of central government’s revenue and expenditure.”
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    “Yes, it is time to make some policy announcements but the government can do it at any given point in time. The corporate tax cut happened on September 19th and not on the budget day. In the same way, some of the positives that we are seeing could progress on some of the labour reforms,” he said.
    Stock specific, talking about Reliance Industries, Prasad said, “We continue to like it and we have a 10 percent weight over there. I don’t see any need to change that. Therefore, we continue to have a positive view on the stock. ”
    On NBFCs, he said, “We are starting to see some changes in the credit conditions, which means maybe you could start seeing funding available for tier-II NBFCs too. Most of them are trading at pretty reasonable valuations - like Shriram twins or L&T Finance Holdings, M&M Financials - most of them are trading at 1.5 times price to book. The big challenge for them over last 4 quarters has primarily been funding - both availability of funding and cost of funding have been but that should start changing going forward.”
    He further said that we do not expect public sector undertaking (PSU) privatization to happen in a jiffy, it will take time.
    Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
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