Prashant Jain, Executive Director & Chief Investment Officer, HDFC Mutual Fund
You have always been a strong advocate of growth at reasonable price. With the market up almost 40% since September last year, is there reasonable price available in the market as of now?
It depends on perspective. You are right in that the last few months the market has done well. But if we go back six years, the market is up only 30%. In January 2008, the Sensex was at 21,000. Today it is 28,000. It's up maybe 40%. Over this period the nominal GDP growth has been far in excess of this.
I think the most important metric is the P/E multiple. P/Es are at about 16 odd times which is quite reasonable in my opinion and I don't think the earnings are being overestimated because corporate profitability in India is at a 17 to 18-year low. I would say things look quite good and decent.
The bank credit numbers haven't really showed much of uptick. IIP numbers continue to disappoint. What needs to be done in order to kick start the economy?
There is always a lag between what steps you take and the outcome of that. For example, when we started taking not so good steps or wrong steps, the economy showed them after one year or two years, it did not show up in the same quarter. I think the same thing should happen on the way up also.
So maybe for close to a year, the policy direction is right. And of course, it has vastly improved with this new government, but it would be premature to say that economic numbers should start showing up today. I think you must give it few quarters. I think I have no doubt that things will improve going forward.
What looks more attractive right now from a one-year perspective, equity or debt?
I think the outlook is positive for both equities and fixed income. But there is less merit in investing in equities with a one-year time frame. If the investment horizon is only one year then one should prefer fixed income. The equities should come with two-, three-, and five-year views. The risk is less in equities over the long period and it also allows for more time to compound.
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