According to CNBC TV18, DSP Asset Managers CIO Anish Tawakley expects India's economy to deliver healthy earnings growth despite geopolitical tensions and higher crude oil prices. Speaking about the current market environment, Tawakley stated he is 'reasonably comfortable with where things are' and highlighted that 'the economy is in decent shape' with demand recovering and available capacity providing a favorable position. He expects cyclical sectors such as financials, cement, autos and capital goods to outperform over the coming quarters, driven by steady demand that should support earnings growth.
As reported by CNBC TV18, Tawakley acknowledged that higher oil prices don't help the economy but emphasized that India should remain resilient due to its strategic position. He explained that India needs around 5 million barrels of oil a day and has substantial foreign exchange reserves specifically meant for such situations. The CIO noted that when there is a shortage of oil, India should not cut back on consumption as that would reduce economic output, and the country is doing the right thing by using reserves to meet oil needs to maintain economic resilience.
According to CNBC TV18, Tawakley reported that cement consumption and home sales are both doing well, with housing being a key driver of economic activity. However, he expressed concerns about house prices rising to levels that could curb demand, which would become a setback for the economy. He noted that there were concerns that real estate sales would slow down, but that didn't happen, and emphasized that construction activity creates jobs and generates broader economic activity beyond direct sector participation.
As reported by CNBC TV18, Tawakley remains cautious about IT services despite structural changes in the industry. He explained that competition is not irrational when companies remain profitable, noting that margins were too high to begin with and are now moving towards more reasonable levels. He referenced the historical context where Indian IT companies earned margins of 22-26% by offering services at $30 per $100 cost to global clients, but today's landscape has changed with most global companies having their own global capability centers in India. Tawakley uses headcount growth as a leading indicator of revenue growth, stating he doesn't see meaningful hiring increases in the sector yet.
According to CNBC TV18, Tawakley identified insurance as one of the market's most attractive long-term opportunities despite recent market concerns. He noted that even in this quarter, earnings were reasonably good yet the market reaction was quite negative, with investors appearing worried about regulatory changes. The CIO explained that supernormal profitability exists more at the distribution end than at the insurance company level, and insurance companies themselves earn reasonable profits rather than being excessively profitable. He believes regulatory tightening burden is more likely to fall on distributors rather than insurers, making the sector attractive for long-term investors.
