Ridham Desai, Head of India Equity Research and India Equity Strategist at Morgan Stanley, in an interview with CNBC-TV18 has cautioned that we need to keep a watch out for policy errors, not in India, but outside.
"If governments become complacent about the virus or if they become too confident, it could lead to policy errors,” he said. "Given how little we know about this virus, it remains a risk factor. I would remain careful about policy errors and the virus remains news, it doesn’t go away so quickly," he said.
On markets, he said, "We are in a period where we will undergo multiple rerating and we will get very strong earnings growth and therefore very strong performance from stocks. This is a long-term bull market. Within that you will get corrections. However, we have a long way to go before we are done and dusted with this.”
He stressed that gold is treated as an investment or as an asset class. "Gold is not an asset, it is like a currency, it is a medium of exchange, it is a store of value and when you see it from that perspective, the whole dynamic changes about gold. So don't look for cashflow, look to it as a medium or exchange or a store of value," he said.
"We have seen concentration at high levels in the market now for a while. We see acceleration in growth and as growth accelerates, smaller firms do a whole lot better. We think the economy is heading for better times in the next couple of years and if that is happening then the broad market outperforms the narrow market going into 2021," he said.
On COVID-19, Desai said, "The COVID-19 virus [situation] remains uncertain. We should not make comparisons with what is happening in the West because the path of the virus in India has been very different. India is not that badly hurt. Fatality rate in India has remained persistently low."
"We may not get another national lockdown. So the economic damage that we suffered between April and August is unlikely to return. We may get some regional shutdowns if the virus surges in some parts of the country," he added.
"It is quite possible that India hits herd immunity before the vaccine comes and the virus will fade away," he said.
In a multipolar world, corporations around the world are looking to diversify their manufacturing base. "It is very opportunistic that India has chosen to launch its PLI scheme, has managed to get labour laws passed, has managed to create some land banks. So India becomes a very attractive destination hitherto companies were virtually frightened of doing greenfield in India," he said.Watch the video, for the complete interview.