It has been a good start to the week and all the reasons and all the triggers and the direction for the market which was missing, are here now. The FIIs did not give that direction. The earning season did not give that direction. But the GST rate rationalisation is giving one direction. What is your take and how are you reading the markets at present?
Mayuresh Joshi: Two things have happened and one is that a plethora of announcements have been made in the last two to three days. The upgrade by S&P Global in terms of India’s sovereign rating on Friday was a very welcome positive news. Secondly, expectations of GST rationalisation as we head towards Diwali, is going to be a big boost as far as consumption is concerned. Obviously, nuances still remain on the expected revenue loss, following GST cut and how that is going to get recouped to a certain extent and therefore, the overall dynamics in terms of our fiscal deficit numbers is to be seen.
But boosting consumption is the ultimate need of the hour, specifically when the US is talking about tariffs and if there is that additional 25% and furthermore if we are able to negotiate well with the US and even get that base rate of 25% lower, the expectations of 50-60 bps hit in terms of our GDP because of US tariffs even that starts going lower.
On top of that, because of all these measures and moves taken together, the expectation in terms of earnings growth is expected to come through pretty smartly as we head into the second half and can start giving earning support to the market. Therefore, FDIs and FPIs who have been shying away for the market for a combination of these reasons put together will come back very smartly because again as far as the placement is concerned, from a demographic perspective, from a corporate debt to GD perspective, from an external debt perspective, and from a corporate earnings perspective, India will stand out in a scenario where tariffs will still create a lot of uncertainty for most economies in the world.
My own view is that the structural downside seems very limited for the markets. Over the next few months, FPIs, FIIs FDIs will have to come back to India. Domestic flows remain extremely strong. Earnings should start making a decent comeback and consumption should have a huge pullback as well which makes us believe that India is probably one of the best placed markets in the world. So, remain optimistic and positive on the economy and the India growth story.
The government plans to extend steel safeguard duty is what is coming in from the sources and the metal and steel sector is on the radar. We also did see some shine in the sector. But if we talk about the current development, DGTR has recommended extending these duties on imports from China and Vietnam for three years starting at 12% and tapering to 11% by year three. How do you see the fundamentals and in particular for the steel sector?
Mayuresh Joshi: It is sentimentally positive because any kind of an anti-dumping duty which comes through creates a safeguarding impact which is meant to protect domestic interests and therefore from a domestic perspective, the capex continues to be very strong from the government side. We are also seeing green shoots of private capex starting to come through and that basically gives a premise to most of the steel producers to ensure that the volumes that they are making are at least sold out domestically to a large extent. But the bigger question is in terms of pricing itself and pricing is determined on the LME which is a large part of the global demand-supply dynamics. Now because of tariff impositions, what happens in China, with it being one of the proponent manufacturers of both hot rolled and cold rolled steel, becomes very, very pertinent as far as the pricing is concerned. Secondly, in terms of the demand perspective, how is demand expected to shape up – be it North America, Europe, or any other economies in the world – has to be looked at and therefore, the entire perspective in terms of an operating leverage with pricing being extremely important, might still remain a little bit subdued and soft which might not give a complete element of pass through as far as domestic sales are concerned as these are still linked to international prices.Having said that, as input cost is expected to remain a little benign, with expectations of more backward integration that a lot of firms are doing, a few of these domestic firms might continue enjoying the benefits because of the DGTR extension of anti-dumping that is expected to happen. So, domestic focused players might report better numbers in this sector.