The Indian economy is poised for growth and has a fairly stable outlook for the next few years, said C Jayaram, executive director of Kotak Mahindra Ltd while speaking at the India's Consulate General in New York on Thursday.
At the talk organised by TiE's CEO Council on Opportunities in Indian Capital Markets, Jayaram said the Indian economy is relatively strong, with the GDP projected to be at 3.9 per cent for 2003 and 5.2 per cent in 2004.
"Agriculture goes up and down depending on the monsoon but the services sector has witnessed steady growth, interest rates are close to bottom (Reserve Bank of India is seen to retain a soft bias), and inflation is likely to remain benign, especially since global oil prices are going down."
In addition, the rupee has remained strong, which is a huge benefit for the manufacturing sector in India and the highways project are expected to have multiplier effects in terms of turnaround time, interstate activity and will benefit commercial vehicle and cement sectors the most.
"More important, consumer credit, though nascent, is rising at a sharp pace and there are more signs of declining debt aversion," he told the audience of TiE members and various invitees.
While organised players were also getting active in retail financing, he noted that institutions within the country needed to be encouraged and developed to participate as large investors in the equity market. "Currently, most of the trade is either retail or from FIIs."
While he commended the various reforms happening at the state and central levels, including power, revenue, expenditure and fiscal responsibility, Jayaram warned that some states were much ahead of others in these areas.
"With some states dragging their feet, we will likely see distorted development." Following the Infosys guidance recently, some of the sheen has come of the tech sector in India but India still has the potential to become a global leader, he said.
"Even in the equity market, there is very little downside," Jayaram said. "However, there is no immediate short-term trigger, but there are attractive market valuations and most of the downsides are protected by fundamentals."
He, however, pointed out that since day trading remains a significant part of the Indian equity market margin trading was not very high, leading to more derivative trading growth.
"But the markets are so much better now from what they were even a decade ago," Jayaram said. "There's no case for no risk-taking in the Indian markets but we do need long-term institutional investors."
Jayaram, however, maintained that Indian markets were fairly close to have bottomed out. "There are big opportunities in the next year or so and the market is ready to take off."
