The first thing the new government has to do is to remove the financial distrust in the system and speed up policy reforms, says Manish Sonthalia, Head, Equities - PMS at Motilal Oswal AMC.
“The country's financial system is not moving properly. The problem of non-banking financial companies, the liquidity and solvency issues -- these are immediate problems that need to be addressed,” Sonthalia noted.
“My sense is that globally interest rates have peaked for the moment. We are talking about a second quantitative easing coming in FY20. Interest rates in India are also getting cut, at least headline numbers are getting cut and transmission is another issue,” he said.
“Implementation of goods and services tax and the assessments of corporates are now going to happen, which should translate into revenue buoyancy. Nonetheless, in terms of support to the market, it should be an earnings pickup. It should be reflected through initiatives by the government in terms of policy reforms. Any major announcement, path-breaking reforms that are still left to be implemented and you will have the foreigners lap up shares in India. They have been sellers all along barring a few months before this,” Sonthalia pointed out.
“That there is no case for investments in India if you are not willing to look at consumption or savings. We are finding names in these pockets only. It will be a bottom-up approach and it is not that everything across the broader markets are going to do well, they have never done that. So broadly it will be pick and choose, but there is greater opportunity in the broader market as opposed to what you have seen in the headline numbers,” he added.