Sanjay Sapre, president, Franklin Templeton–India
Q. Markets have been falling due to global trade war tensions and because they had factored in a BJP win. What’s your reading?
Predicting the market and elections is fraught with difficulty. The reality of India is that elections are a reason for volatility. But they have not been the driver for long-term stock market returns or for long-term economic growth. The popular view is that what is priced in is the incumbent’s returning power. If the result deviates from the street consensus, there will be short-term volatility… beyond that markets will be based more on fundamentals than sentiments. Q. On the back of the IL&FS debacle, ratings agencies are downgrading papers faster and some large corporates with debt are struggling with payments. Is there a debt crisis looming?
I don’t think there is a debt crisis looming. If we go back to the NBFC crisis, there was a view that post IL&FS, the sector will see a doom-and-gloom scenario, but what has played out there is that the issue has clearly differentiated stronger players from the weaker ones and there is no full-blown crisis in that segment Q. How are funds dealing with the scenario of companies missing payments to mutual funds (MF)?
It depends on what options are available to you. Hypothetically, there are only 2-3 and the one that is often talked about is why don’t MFs sell the shares. The other option is, let us work to make better recovery but there is no timeline for that. The misconception exists that if you don’t sell, it’s wrong and when you have shares you have to realise value from it immediately.
We don’t blindly rely on ratings. Credit ratings are an indicator, but not the sole reason for decision making. For the average investor, credit rating is important information and hence you can’t discount it. It is important that the process is assessed and necessary improvements are made.
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(This story appears in the 07 June, 2019 issue of Forbes India. To visit our Archives, click here.)