‘Capital flows would be more volatile’

We can look at this through three channels – imports, exports, and cap­ital flows. Imports have been the big­gest benefit to India, as 35 per cent of our country’s import expense com­prises crude oil and that has halved. Our import basket is commodity- heavy and most commodity prices have fallen 30 per cent, so we make massive savings on import. On the other hand, our exports, especially software services, are not likely to be hit in a major way. So, the net result is positive for India. However, certain parts of the economy – gems & jew­ellery export, agro-product exports, steel exports etc – are likely to be hit. Any production that is linked to import price is likely to slowdown. So, broadly, the winners are the gov­ernment and the consumer, while the losers are some sections of the industrial and agro production.How is the global slowdown likely to impact the Indian economy and the stock market?

The third channel – capital flows – is likely to be more volatile, owing to a weak rupee. The rupee depreciation was overdue, as it had outperformed emerging market currencies by quite an extent. Essentially, those exporting to developed countries would benefit. Even though, the Indian rupee out­performs the emerging market cur­rencies, foreign portfolio flows into the overall emerging market basket is going to get impacted and, hence, capital flows into our country will also be hit.

In the last five to six years, the Indian currency has been depreciating against the dollar. Despite that, we saw robust capital inflows. About one-third of the total foreign capital flows, that India has ever received, have come in the last three to four years…

This is true, but we must also view
the capital inflows relative to the ;ize of our GDP. In 2010, we received $29 billion because, at that time, we were close to a trillion dollar economy. Last year, despite the good election verdict we received $16 billion on a $1.7 tril­lion economy. Though $16 billion is not bad, it is considerably less than the size of the economy. Secondly, if I were to add foreign direct invest­ment to foreign institutional invest­ment and view that as a proportion to our economy, then the numbers are not big. So, India has been outper­forming emerging markets because we have benefitted in trade. Earlier we were importing $120 billion worth of crude oil and exporting software worth $80 billion. Now our crude oil expense has come down to $60 bil­lion, while our software exports have remained the same.

You said earlier that depreciation of the rupee was overdue. What level do you expect the rupee to stabilise at?

The rupee may depreciate by 3-7 per cent. If the yuan depreciates by fur­ther 5 per cent, then the rupee will weaken 7 per cent, but if both yuan and dollar are flat, then it is likely to depreciate by 3 per cent.

Do you expect further depreciation in yuan?

No. If they let their currency depre­ciate further, their macro-economic stability comes under question. Sec­ondly, the Chinese government has to maintain the holy trinity of capital flows, exchange rate and interest rate. I believe that the yuan depreciation was not only for economic growth. There were capital outflows from China in the last two months, and they were trying to prevent that and at the same time ease monetary pol­icy as well, and they had a fixed cur­rency. So, they had to let something
go. It is more of prioritising some­thing rather than aggressively saying we need export growth.

As the rupee has taken a beating against the dollar, there is a theory in the market that it makes more sense to invest in information technology and pharmaceutical stocks. Would you buy that argument as you too expect the rupee to depreciate further?

Today, we are positive on IT because of valuations and exposure to devel­oped market currencies. We are also heavyweight on pharmaceutical sec­tor. We increased our weightage in pharmaceutical sector from 6 to 8 per cent in the last two months. We are more positive on IT, as some of the pharmaceutical companies do have exposure to emerging markets and some have higher valuations. Within the defensive basket, we are relatively heavy on IT and pharma as compared to consumer staples. Generally, as a house, we believed that the rupee was too strong.

Suppose you had to start a new fund today, which sectors would be your top picks?

We believe that the structural story is in market trends, rather than indus­trial growth, because, in a growth-less world, it is difficult to make a premise on which industry would grow fast. I would prefer retail banks, information technology and insurance sector. ♦
Zee Media Corporation Limited (ZMCL) announced its intention to enter into English News Broadcast­ing with the appointment of Rohit Gandhi as editor-in-chief – english news broadcast and related con­tent. He will be heading the opera­tions of all initiatives in this space, working closely with the busi­ness head and revenue resources. He will report to Punit Goenka. ZMCL has not announced the exact date of launch of the chan­nel. Gandhi comes with over 23 years of experience across 40 coun­tries. He has managed the complete gamut of the news business and won many international awards including the Edward R. Murrow, Dupont Award, Emmy, Golden Cine Eagle, Grade Award and the Headliner Award.
English editor

Other interests

After a distinguished career of 16 years with Castrol India Limited, six of which were on the Board of Direc­tors, initially as chief operating offi­cer and subsequently as managing director, Ravi Kirpalani will be leav­ing the company to pursue other interests. Kirpalani will step down as managing director with effect from 30 September 2015 but will continue as director and whole-time direc­tor from 1 October 2015 up to 31 December 2015 to ensure a robust management of change and facili­tate a smooth transition. He will be succeeded by Omer Dormen, who has been with Castrol/BP for over 30 years in various positions globally and is currently sales director of BP Lubricants for CIS, Turkey and Cen­tral Asia. Dormen will be appointed as an additional director and managing director of Castrol India Limited with effect from 1 Octo­ber 2015, subject to obtaining all necessary approvals.

Creative offering

Lowe Lintas has named Shayond- eep Pal, executive creative direc­tor, to head the creative offering of
its New Delhi office. Pal takes over from Shriram Iyer, who was recently named NCD, Mullen Lintas. Pal will report to Arun Iyer, chief creative officer, Lowe Lintas. Pal has been part of the creative team in Delhi for more than six years and is involved in the creative execution of a number of notable campaigns for prominent clients in the region, including OLX, Micromax, Hindustan Times, Maruti Suzuki, Google, and Pernod Ricard.

Assuming charge

Kishor Piraji Kharat has recently assumed charge as managing direc­tor and CEO of IDBI Bank. Prior to the current assignment, Kharat was posted as executive director, Union Bank of India. Kharat has to his credit the honour of establish­ing a foreign subsidiary of Bank of Baroda in Trinidad & Tobago, West Indies, and headed the same as managing director for more than three years. He was also a founding member of India Trinidad & Tobago Chambers of Commerce & Indus­try, which fostered trade between the two countries. He has been a key driver for implementation of major financial inclusion initiatives and has worked closely with the RBI as well as the government of India in this regard.

New elevations

In order to elevate the integrated offering to clients and to ensure effi­ciencies and effectiveness centered around great ideas, three senior mem­bers have been added to strengthen the activation, OOH and media team at the Gurgaon office of DDB Mudra- Max. Puspendra Singh who comes in as senior VP, DDB MudraMax- OOH & Experiential will be respon­sible for client delight, while Arijit Chakrabarti, general man­ager, will be responsible for data, insights & strategy for entire DDB MudraMax including their media/ digital offerings. Bhuwan Pan- dey, general manager, will focus on driving efficiencies and partner relationships.     ♦


Leave a Reply