Surplus liquidity coupled with historical low bonds yields are bringing investors to the equity market, Saraf told ET in an interaction.
Is Covid-19 a blessing in disguise for select companies?
There are quite a few companies whose business model got a boost due to Covid-19. Those companies are from sectors including specialty chemicals, technology, and pharma. They will likely consider growth capital this financial year.
Where do banks stand amid ample equity fund flows?
Large four-five banks would be the beneficiaries as investors are seeking a flight to safety. Banks are also taking advantage of record low interest rates as they are replacing their existing high-cost debt with lower coupon bonds.
Many mid-tier banks are now raising capital to demonstrate confidence to their depositors.
How do you assess overseas investor appetite for India?
Foreign Portfolio Investor (FPI) appetite for India is strong amid sloshing global liquidity. Long only, alternative strategy, and sovereign funds are among them. They are taking call keeping next two financial years in mind as FY21 is an aberration for them.
They are looking at quality of the management, sustainability, and corporate governance. These traits have become the building blocks to evaluate the company.
How will US elections play out in India?
Global market volatility will influence Indian markets. Any change in guard at the Washington DC will trigger short term volatility across the emerging markets including India.
Back home, companies are trying to raise capital before the US elections as volatility would creep in. They will likely tap the capital markets again once the scene regains stability after US elections.
What is your estimate for equity capital?
Some companies chose to wait as they are busy assessing the impact of Covid-19. They are likely to come up in the next half of the financial year.
For equity capital market, we believe this financial year will set a new record, overshadowing the 2017-18 when ~$25 billion was raised via equity capital. During April-September, companies have already raised ~$21 billion, vs $~12 billion in same period in FY20. The second half promises equally active. You may expect over ~$27 billion equity capital raising this financial year.
Which sectors could be at the forefront of capital raising?
Telecom, Banking are two of them besides companies gaining business due to the pandemic situation. Some companies are adopting a duel track strategy as they are raising confidence capital for both organic and inorganic growth. Secular growth capital raising is still a few quarters away.
Why are investors chasing equities only?
Surplus liquidity coupled with historical low bonds yields are bringing investors to the equity market.
Globally debt market yields are falling driving investors to equity markets that hold potential for higher investment returns. Interest rates are at historically low with bank fixed deposits yielding just about 4 percent post tax. The proportion of equity investment is increasing in search for higher returns.
Stock markets are rallying amid an economic gloom. How do you explain this?
Global stimulus led liquidity is chasing stocks. The fundamental way of valuing companies took a backseat. Investors are also looking at theme-based investing.