One must not look at Rupee in isolation: Vikas Khemani, Edelweiss Securities

Vikas Khemani, President and CEO, Edelweiss Securities Ltd, in a candid talk with Rahul Kumar, Zee Business, said, "Impact of structural reforms, like GST, RERA and Demonetisation, has come to an end and this growth in GDP numbers is here to stay and will continue. This growth is backed by an increase in consumption and investment cycle." Here are the edited excerpts: 

India's GDP growth numbers are quite impressive. What is your take on the new number and do you think that it is going to stay? Or the increase in repo rate by RBI in its two consecutive monetary policies will affect it? 
GDP has returned back on track after a long time and I think that this growth story will continue. In fact, it is just a start as certain reforms like GST, demonetisation and other structural reforms like RERA and Bankruptcy code managed to put a break on the growth story but now we are out of its impact. The investment and consumption cycle of the country has played an important role in this growth and I don't believe that any increase in interest rates will have an impact on growth. 

There will be an increase in the timeline of Equity derivative trading from October 2018. Do you think that we are ready to digest it and how is it going to benefit the investors?
No one is ready for a change but accepts it whenever it comes in the way. It was planned with an aim to match up with foreign markets where trading, especially in index derivatives, is allowed for 24 hours. It is a part of the global market integration. I think it is a good step and the market, which is not quite prepared to handle it at present, will be able to handle it after facing certain hiccups. 

Rupee is falling against the dollar. Do you think that the Indian currency is really getting weak or we are standing in a better position then the currencies of other countries? 
One must not assess Rupee in complete isolation and its depreciation should be compared to the depreciating values of other emerging markets. Rupee is outperforming when compared with other currencies. I feel the existing trend is related to the strengthening of the US Dollar and trade war is something that is benefitting it. In addition, US Fed rate hikes also have an impact on the emerging markets and it is a natural trend and this fall is a part of it. That's why I feel that one must not look at Rupee in isolation. 

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Do you think that the continuous rise in crude prices will have some impact on the manufacturing sector?
We are a fuel importing country and that's why this price rise is not good for India. In fact, simultaneous currency depreciation and rise in crude prices are negative for India as it will have its impact on inflation and thus it is a matter of concern. I feel we should wait and look forward on the embargo on Iran and if India fails to buy oil from there it may lead to further increases in fuel prices. This is the biggest risk of the current period and we should be ready to absorb this shock. 

Markets are at record highs and it is being said earning season is a reason behind this run. Interestingly, India will be voting in the recent future. Do you think that the elections can put a break on the rally that is visible in the market at present?
Corporate earnings for the past two quarters and existing liquidity situations are the reason for this new high in the market. Mid-caps are still down as most of the investors are trying to stay in large caps and liquid to protect themselves in case of events that may have an impact on their liquidity. I feel it is a very tricky situation for the market where investors are willing to remain in liquid stock and this is something that is providing new highs to the market. Our underlying economy is doing well and will pay-off to the long-term investors even in midcaps if they invest by choosing good sector and segments. However, oil prices and elections can bring a correction. A long-term view of 3-4 years can provide good opportunities in the market but short-term investors should remain careful while investing in the market.