India in a sweet spot; current high inflation could be transient, says Rahul Singh of Tata Mutual Fund

livemint.com:

Rahul Singh, CIO-Equities, Tata Mutual Fund, in an interview with Mint. He added that slower urban consumption contrasts rural recovery. He also shared his views on rate cuts by the RBI and the IT sector.

Edited excerpt: The present market places India in a sweet spot notwithstanding the present high inflation which can be transient. Lower global GDP growth including China has put pressure on commodity prices and input costs which is providing a cushion to corporate earnings even as urban consumption slows and rural is slow to recover. Interest rates are also likely to remain higher for longer which implies that the markets may continue to witness valuation discipline and Growth at Reasonable price (GARP) may perform better in the current market structure.

India’s above-par GDP growth rate, stable macros and strong balance sheets may continue to attract valuation premium. Risks to the above view would include crude prices (which can affect the macros) and/or any deviation from the consensus view on political continuity in 2024. Banks, manufacturing and capital goods met expectations on growth and outlook even as there was some pressure on net interest margins (NIMs).

Pharma was the surprise package with the pricing environment improving at the margin. While the topline growth especially in urban discretionary segments was slow, the margin improvement was almost uniform due to lower input prices CPI inflation for the month of July 2023 has come at 7.44 per cent, with food inflation at 11.51 per cent. Core inflation which excludes food and fuel inflation has come at 4.90 per cent.