ET NowIn a chat with ET Now, Amandeep Chopra, Group President & Head-Fixed Income, UTI MF, shares his macroeconomic outlook. Excerpts:
ET Now: You are not very optimistic about a rate cut. Does that suggest that you think the economy is still not out of the woods?
Amandeep Chopra: To some extent, yes. Growth does not really seem to be picking up the way the markets have been expecting it to. We clearly need to watch out for the Q3 and Q4 GDP data, which will essentially indicate whether we will hit 5.5% for the full year or not.
If you really look at the recent IIP and the PMI data, they continue to remain soft, and unless there is a significant pick up in the current quarter’s GDP, it is really going to be a little difficult breaching the 5.5% to 6% band.
If you really look at some elements of market expectations on the interest rates, that is still largely driven by how the headline inflation is trending. The recent data clearly has shown a much softer CPI reading than what the RBI trajectory was. In that backdrop, maybe the markets are possibly getting a little too bullish in our view.
We think the headline will start creeping up. There is a fair amount of base effect here and we still need to see the impact of the post-monsoon crop as well as some other consumption driven pick-up in inflation to pan out over the next quarter. So we clearly would be fairly cautious at the current 10-year yield levels.
ET Now: Absolutely, but if you look at corporate demand for bank credit, that seems to have certainly plunged down and in fact, we have seen for the first time bank credit growth has been much less, less than 10%. But at the same time, retail loans, retail sales going by Dhanteras numbers seem to have really done quite well. So how much long or before corporate demand picks up?
Amandeep Chopra: Our house estimate is that we are still two quarters away for corporate demand to really pick up. We may not see a significant pick up in corporate activity for the current financial year as a whole. That is still going to be a little bit more back ended and possibly coming into the next financial year.
We may see some element of pick up in the Jan to March quarter, which typically does tend to also pre-empt a fair amount of manufacturing sales and a little bit of pick up in the services activity as well.
Unlike what we have seen in the earlier years of 2012, we are not looking at really that sort of element of pick up taking place. On the whole, we would seek possibly a GDP of close to 5.3% for the current financial year, maybe a few basis point over there.
ET Now: You are not very optimistic about a rate cut. Does that suggest that you think the economy is still not out of the woods?
Amandeep Chopra: To some extent, yes. Growth does not really seem to be picking up the way the markets have been expecting it to. We clearly need to watch out for the Q3 and Q4 GDP data, which will essentially indicate whether we will hit 5.5% for the full year or not.
If you really look at the recent IIP and the PMI data, they continue to remain soft, and unless there is a significant pick up in the current quarter’s GDP, it is really going to be a little difficult breaching the 5.5% to 6% band.
If you really look at some elements of market expectations on the interest rates, that is still largely driven by how the headline inflation is trending. The recent data clearly has shown a much softer CPI reading than what the RBI trajectory was. In that backdrop, maybe the markets are possibly getting a little too bullish in our view.
We think the headline will start creeping up. There is a fair amount of base effect here and we still need to see the impact of the post-monsoon crop as well as some other consumption driven pick-up in inflation to pan out over the next quarter. So we clearly would be fairly cautious at the current 10-year yield levels.
ET Now: Absolutely, but if you look at corporate demand for bank credit, that seems to have certainly plunged down and in fact, we have seen for the first time bank credit growth has been much less, less than 10%. But at the same time, retail loans, retail sales going by Dhanteras numbers seem to have really done quite well. So how much long or before corporate demand picks up?
Amandeep Chopra: Our house estimate is that we are still two quarters away for corporate demand to really pick up. We may not see a significant pick up in corporate activity for the current financial year as a whole. That is still going to be a little bit more back ended and possibly coming into the next financial year.
We may see some element of pick up in the Jan to March quarter, which typically does tend to also pre-empt a fair amount of manufacturing sales and a little bit of pick up in the services activity as well.
Unlike what we have seen in the earlier years of 2012, we are not looking at really that sort of element of pick up taking place. On the whole, we would seek possibly a GDP of close to 5.3% for the current financial year, maybe a few basis point over there.
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