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India is a great market for investors looking at 3-5 years or more: Nirmal Jain, IIFL

We are going through a corrective phase with a positive bias and it will be over in a few months, says Jain.

, ET Now|
Last Updated: Nov 30, 2018, 01.29 PM IST|Original: Nov 30, 2018, 01.26 PM IST
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Most large, high quality investors are serious about India and are looking for opportunity in terms of valuations, stability and environment, Nirmal Jain, Founder & Chairman, IIFL, tells Ajaya Sharma of ET Now in an exclusive chat.

Edited excerpts:

Is the volatility in the market going to persist? Is the end of the corrective phase near?

Our markets has not had a bearish phase for 10 months and have been volatile. The markets did very well from 2014 when the new government came to power, given their reforms and the improved outlook on the economy. I think it is a short-term corrective phase of one or two quarters. One should not get too perturbed about it.

But if you are a long-term investor and look at the next three to five years, then I am personally very optimistic and very bullish on Indian economy and the performance of the stock markets here.

The corrective phase that we are seeing also has made valuations more reasonable. So, if long term investors have not allocated enough on equities, they get an opportunity to increase their weightage in equity assets. Regardless of what happens to the global environment and local politics, these things will play out for a few quarters at best. But if you are a long-term investor looking at three-five years or longer, then India is a great market to invest in.

How are you looking at the entire financial space? Do PSU banks merit cherry picking? Some corporate banks are doing exceedingly well and NBFCs seen corrective phase. What is your take?

We have been passing through an interesting phase. For the sector to do well as a whole, credit and insurance growth has to do well. Within that, PSU banks have been waiting for infusion of capital to revive, resuscitate and get out of the historical legacy of bad assets that they have. This government has tried to do a little bit but unfortunately few things developed and a lot of work and even the courageous bold step of infusion of more than Rs 2 lakh crore has been negated for the time being at least. If the government comes back to power, then we expect the PSU banks to revive in a sustainable manner.

NBFCs now account for more than a third of incremental credit. This is not a small sector and plays a very vital role in economy’s growth and this sector is here to stay.

But the latest regulatory crisis have been a wake-up call. People who have been trying to work on the edge in terms of liquidity or in terms of managing their cost of funds, have got a wakeup call and hopefully balance will return. When the stock blows over and the dust settles, we will see that the men are separated from boys and the good players will become stronger and play a meaningful role. Private sector banks have been doing well by and large. I do not think there is any challenge there.

What is your take on capital goods sector? Do you see the cycle turning now? A lot of largecap management commentaries seem better; earnings are gradually improving but can this be said about the entire capital goods space?

The capital goods sector is very heterogeneous because there are different types of companies -- MNCs, local companies and there are many sub-segments and industries within the sector and each has different factors playing on them. Some of them have competition from imports, some of them have their local demand and supply situation. It is very difficult to make a generic statement but then there are good stocks and good companies in the sector.

You also interact with a lot of global investors. What is the idea you are getting about their mood on India? For a very long time, global funds were sellers in India. Now some green ticks are coming back.

Global funds are cautious and it is not only the local factors that play on their minds or their decision making process, even the global factors. When the US Fed is hiking interest rates, obviously there is a tendency for the funds to move back to the USA which is a relatively safer haven. So, global investors have to take cognisance of factors like China, US, what is happening in other countries and also what is happening locally here in India.

Most of the global investors are watching the developments carefully but most large high quality investors are serious about India and are looking for opportunity in terms of valuations, stability and environment.

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