Adrian Lim, investment manager (Asian equities) in Aberdeen Asset Management gives his views on the Budget.
According to him the inflation was a key concern that was addressed in Budget. Over all it has been a good sensible Budget with no surprises. The corporate has been somewhat uncomfortable with DDT though short-term gains have been granted to select sectors. No bargain hunting seen in Indian market in the short-term and nothing will ruffle feathers for a long-term investor.
According to him, the last 2-3 yrs have seen an evolutionary rather than revolutionary change for the markets. He believes that inflation concerns will be addressed by import tariff reduction. Excerpts of CNBC-TV18's exclusive interview with Adrian Lim
From a global investors perspective, are you disappointed overall or on a few particular sectors?
I think over the last 2-3 years you have seen a Budget that has been more evolutionary than revolutionary. You have seen a balanced approach and I think this Budget is no different. The government continues to emphasize on rural spending, infrastructure spending and it has got a little bit more generous this time because its collection has been much better over the last 2 years than it was at the beginning of its term.
We have also seen that inflation is a key concern and they have addressed it by lowering import tariffs and adjusting the economy at the fringes. The corporates however are pretty uncomfortable with the dividend tax and the software engineering companies being targeted for additional taxes but that's also a predictable outcome.
You can't expect the software companies to continue with relatively light tax burden given a situation in the Indian Budgetary balance. But it's been a sensible Budget, no huge surprises, some short-term gains and pains in selected sectors. But, by and large nothing that really ruffles our feathers as long-term equity investors.
From your perspective, do you find any reason to churn your portfolio?
If you are looking at the fundamentals, the fundamentals in some sectors, like materials and IT, will see a bit more modest levels of growth going forward at the current earnings level. But from outside the fundamentals, pricing levels of Indian equities have been volatile over the last few days, not because of the Budget but because of wider concerns on global liquidity and it might give us some chances for selective topping up of some of our investments in Indian market.
But we must take in to context that the fall in India equities has been roughly matched in line with what you get regionally. So you are not seeing any bargain hunting at this point in time, not for the short term anyway.
How are you mapping the global turmoil of the last few days?
It's been a difficult time for us. I think it's been even difficult to retrospectively analyse what went on. A lot of people have been holding on to sound bytes of the Chinese credit controls, having held on to soundbytes of US caution. But it's really difficult to identify one specific region.
I think over the last 3-4 quarters generally it has been acknowledged that the global markets are not cheap; credit pricing is a little bit awry at times. You have a situation where some profit taking, pausing to catch their breath would be expected.
What is the sense of what the Central bank in China has done. Is it a recession event, would you read it as that or just risk reduction?
I think it's too early to tell. You have had analysts on both sides of the coin. I agree that domestic factors will have to take a back seat until the liquidity trends become clear at the regional level and at the global level. So I think any stock specific analysis at this point in time would be a bit futile.
We do need to wait for a few more sessions to see where liquidity will settle at, but its comforting to know that at this early stage the market seems to have settled in India for this morning at least.
Everybody is looking westward and eastward trying to figure out what the next global cue would be. How are you mapping the global markets over the next month or so?
A: What we will pay attention to is on specific stocks and we will look for pricing opportunities where we can go in and buy more on weakness. I think the fundamentals that you see across the region at least at the stock level are still very strong. You see growth expectations continuing as you are seeing earnings numbers coming in at still healthy levels.
Undeniably, you do see inflationary pressures across not just India but across the Asia Pacific region. So we would bear that in mind but we might see some pricing opportunities next month out but it is too early to call a strategy at this point in time.
Real estate has been quite a hit. Do you track that space; do you participate at any of the issues that hit the market here?
Not in the Indian market so far. For some of the Indian markets the concepts are pretty interesting, there are a few leading property houses, which have a fantastic track record of execution and development. But it is also quite difficult to call; we have seen some of the cities like Bangalore, for example where pricing power has gone to the consumer a little bit instead of the developer.
So I think at the current levels of interest quite a lot of good news has been priced forward for the next year-and-half or two years. So we have been quite shy of the real estate exposure in India but we continue to monitor that space with some interest.
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