Fund managers will have to rethink investment ideas -K V Kamath
Domestic fund managers will have to rethink what investment ideas will see growth over the next decade to deliver investor returns, said veteran banker KV Kamath at the Reset 2020 conference organised by ICICI Asset Management Company (AMC) for its distributors and investors.
“Money managers will have to identify companies that drive growth in this new reset. And that is likely going to be a blend of new and old companies. The markets overall will be driven by these new stars,” said KV Kamath, founder and former managing director and chief executive officer of ICICI Bank.
He pointed out that every decade the number of companies falling out of the top league in the capital markets has been more than those remaining in it.
On the recent disruptions in the economy, KV Kamath said some sectors will continue to be in pain. “Construction, real-estate in some cities, hotel, travel and tourism, the jury is out there. We don’t know at what point of time these sectors will come back,” Kamath said.
“Players in the financial system have pain at various levels. We will need to look at the numbers that come out from these institutions and central bank to understand what is happening on that space,” Kamath added.
Kamath underlined that some businesses will need balance-sheet re-structuring. “We were having a meeting with heads of all development banks in the world. Almost everybody said that they expect massive balance-sheet restructuring in the countries they operate in. Not sure whether India will need massive balance-sheet restructuring, but restructuring might be required to some extent,” KV Kamath said.
Kamath said low-interest rates in India is positive, and the link between inflation and interest rates has been long broken. “The two have separated long back, don’t think we will have a situation where interest rates are heading north because of inflation going up,” said.
The consumer price index (CPI) inflation for July stood at 6.93 per cent, rising from 6.23 per cent in the previous month. The spike in inflation has dimmed expectations of further interest rate cuts by the Reserve Bank of India.
Apart from low-interest rates, Kamath said low commodity prices in India, high domestic liquidity and very strong currency flows, were other positives for India.
He also pointed out that large Indian corporates had stronger balance-sheets now to take part in the recovery.
“In 2000, debt to equity of large corporates that were among the Sensex companies was 3.8:1. It improved at 1.8:1 in 2010. Today a large number of these Sensex companies, have hardly any debt or nominal debt. Strong corporate balance-sheets will make recovery that much better,” KV Kamath said.
