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    Firms seeking opportunity in this crisis will thrive: Navneet Munot

    Synopsis

    Munot said govt focus should be on leveraging data and tech to accelerate transformation.

    iStock-1151811508iStock
    Profits at NSE Nifty50 index constituents fell about 15 per cent last quarter from the same period last year, marking the worst drop since at least 2014.
    NEW DELHI: Stressing that large corporate profit pools are necessary to fund investments leading to employment and income generation, Navneet Munot says profit is also critical for companies to innovate, as without it, they will not be able to fund research.

    A Bloomberg compilation of data suggested profits at NSE Nifty50 index constituents fell about 15 per cent last quarter from the same period last year, marking the worst drop since at least 2014.

    “Corporate profits as a proportion of GDP have been dwindling for almost a decade now. Aspiration to play a prominent role in the global supply chain requires pro-business policies that incentivise creating organizations of the size and scale that can compete in the global marketplace,” the CIO of SBI Mutual Fund said in a note.

    He said the government focus should be on leveraging data and technology to accelerate the transformation.

    Munot praised the recent government announcements of credit guarantee support to MSMEs and to some extent NBFCs. He said this should help better transmit and allow money multiplier to kick in, but that may not be enough.

    “The gravity of the slowdown may force the government to spend more to revive demand. If additional borrowings are accompanied by a credible medium-term plan to revive growth with an emphasis on structural supplyside reforms and a roadmap on fiscal consolidation, it may not be taken negatively by rating agencies,” the veteran fund manager said.

    Moody’s last weekend downgraded India’s sovereign rating to the lowest investment grade, citing growth challenges in the wake of Covid-19, high GDP-to-debt ratio and problems in the banking sector.

    Munot, who manages Rs 3.5 lakh crore worth of assets, reiterated that RBI would need to undertake calibrated monetization of additional borrowings. “On its part, it has been aggressive on rates, liquidity and transmission. Yet, the current yield curve is one of the steepest in India’s history. Given the sharp jump in the quantum of bond supply, the market would be keenly watching the actions of the central bank in creating additional demand avenues, including OMOs,” he said.

    Munot sad further relaxations may be needed for greater flexibility to lenders for one-time restructuring.

    Outlining the investment strategy in times of heightened volatility, he said SBI Mutual Fund is maintaining a relatively high duration in fixed income funds. “We expect the bond market to be in a consolidation mode for the time being,” he said.

    Talking about equities, Munot termed the situation chaotic.

    India has been dealing with a deadly mix of issues ranging from a pandemic, country-wide migrant crisis, locust attacks, cyclones, earthquakes, border tensions with neighbours, a ratings downgrade, all coming together testing its resolve.

    “Adding to the macro issues, disruption is becoming the norm -- be it around consumer behaviour, technology, policy, geopolitics, supply chains, and so on. The response can be either to hope for normalcy to return or to seek opportunity in this apparent chaos. Firms that take the latter approach are likely to survive and thrive,” he said.

    How can firms grab the opportunity that this chaos presents?

    Munot said a focus on R&D, risk management, development of skills and treating all stakeholders fairly amid the crisis can help them go a long way.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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