In an interview with ET, the money manager said he is more constructive on India’s equity markets now than he has been for a long time, and is hoping for a revival in corporate earnings to support his bullish thesis.
“Earnings will need to be the next catalyst for us to move forward, which is what we expect to play out in the second half of the year,” said Holland. “I think we are at the start of a bull market. We see the Nifty at 20,000 between now and March-April next year, but it is only a 10% increase from the current levels and isn’t something massive or significant.”
On Friday, the Sensex and Nifty rose to fresh closing highs. The Nifty closed at 18,826, up 137.90 points or 0.74% from the previous close, and is just 0.3% from the all-time high of 18,887.60.
Holland, who spearheads two equity-focused funds at Avendus, believes that interest rates in the US and other developed markets are near peak levels after global central banks trailed the inflation curve and then aggressively raised interest rates in the last 15 months.
“Our view is that the US Fed will have to reduce rates by the end of the year,” he said. “This is because of the unintended consequences of aggressively raising interest rates on the US banking sector. The continued tightening has spread to the US’ commercial real estate and areas which the US treasury and Federal Reserve will have less control. It is so big and has so many players that it is one area that I am still worried about.”
Holland said as interest rates fall, the world will chase growth once again, making the emerging markets (EM) region, and particularly, the Indian markets, look attractive albeit at premium valuations.”India’s valuations are challenging when compared to the other EMs. But let’s take China, for example. China had got a lot of inflows initially when they reopened but now that’s ebbing a little bit because the economy is taking time to pick up,” said Holland. Holland is bullish on India’s financials, which remain at the heart of the economic growth revival. The recent set of quarterly earnings as well as the impending merger between mortgage lender HDFC and HDFC Bank gives him confidence. “I am waiting for the merger between HDFC and HDFC Bank to complete because that will be the catalyst for the banking sector,” he said.