ET Now: We need to make sense of the market impact of all the geopolitical tension that we are seeing brewing between us and Pakistan, it is expected to escalate going ahead as well. We have held the Indus Water Treaty in abeyance. Tell us the impact of all of this in terms of geopolitical stress and also, how this would impact our markets, what can we expect heading into Monday given we still have a couple of days before the next trading session and the kind of news flow we can expect to hear over the weekend?

Ajay Bagga: Yes, after that opening segment of yours, I wanted to say have a happy weekend and move off because you have covered everything quite substantively. Looking at the geopolitical tension, we have to see what happened during the Uri strike and the Balakot strike. So, between the terror strike and the Indian retaliation, the time was about 10 to 15 days, 10 for Uri and 15 days for Balakot. So, you can expect that over the next two weeks there will be a geopolitical event that is what is the overhang on the Indian markets, otherwise based on the trade wars de-escalating and the risk sentiment improving, we have seen Asian markets doing much better, we have seen European markets recover quite well despite slowing growth in Europe and still no visibility of Europe signing a deal with the US and US markets, of course, we have seen the previous three days a sharp recovery even in the big tech, the Magnificent-7 have rallied upward.

So, overall global risk-on has improved slightly and we are seeing hopes of some kind of a trade deal. Still the China one, there are two narratives, there is a Chinese narrative which is calling Trump’s statement a fake news, that they are saying nobody from our side has engaged with the US counterparts, Trump has said we are in discussions with the Chinese and we talked with them even this week. So, one does not know where exactly the reality is. But both sides hopefully will strike some kind of a deal or at least deescalate from the present tariff level. So, India all the tick marks are there for continued recovery in the Indian markets. We have outperformed in March and April, expectation was that that would continue; however, the geopolitical overhang and it is anybody’s guess when in the next 10 to 15 days you could see some geopolitical event on the Indian subcontinent.

ET Now: Want to get your view on our GDP growth outlook. The RBI pegs our outlook for this year at 6.5%. You have IMF that has come in and slashed it to 6.2, World Bank to 6.3. How much if at all do you agree with these growth estimates and do you believe factoring in everything that we are seeing in terms of geopolitical tensions right now, what do you think is our growth trajectory for this year going ahead?

Ajay Bagga: I would go with the RBI number, but definitely there is an impact of the trade war, so that is still a lot of it is to be closed out. Our bilateral trade agreement will probably happen by July end to September some time we should be able to sign that. Even this 10% tariff will have some drag on the Indian economy. Overall, sentiment around the world is on a stop basis and the IT order flow has reduced a lot, the kind of moment that we see that is lacking as far as the management guidances have come. So, I would go with the RBI number right now, but it will trend lower as we go towards the second half of the year.

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The good news is the rate cut transmission will happen that will lend a leg-up to the economy and we are expecting two more rate cuts still in this calendar year, so that is going to help us. Overall, the domestic economy should be okay. It is looking like a normal to above normal monsoon, but as you mentioned the geopolitical risk with Pakistan stays quite elevated and it will depend a lot on whether it is a one-off event or it becomes a wider conflagration, if it becomes wider, then there could be an impact on the GDP. But I would say we are probably looking at something in the range of 6.3 to 6.5 as of now.

ET Now: Want to get your sense on the market impact if any of this in terms of how you are viewing the defence group of stocks now. Do you believe that this could have any impact on the defence group of stocks given that now India would ideally look to strengthen its arsenal of the kind of artillery, the weaponry, that we have, what is your outlook on the defence pack on the back of everything that is happening?

Ajay Bagga: Very true. Overall global geopolitical risk is elevated and then we have this issue of this terrorist massacre in Kashmir. So, both will lead to higher defence outlays and ratcheting up of immediate defence production, so defence stocks will do well in this kind of a scenario and we are expecting India to spend more to increase its defence preparedness. So, defence stocks are a good sector to look at. Around June we saw the correction setting in on the base of valuations being quite elevated, then we saw a good correction and now again, they are finding favour over the last three to four weeks that should continue and our defence sector should outperform the market.

ET Now: If you could just help me understand how we are positioned now to the world in terms of foreign ownership coming into India because after the correction that we have had, we had a big pull out coming in from FIIs, we have just seen some flows coming in and once again this volatility that we are seeing in the market, where do you think we are placed in terms of how we are looked at, do you believe that this correction is going to provide an opportunity to FIIs to see us as a buy on dips market or do you believe that we are still very highly valued for the FIIs to make their comeback?

Ajay Bagga: We are looking quite attractive. We are reasonably valued is what I would say and if we look at where the FIIs are really coming in, they have been going more into the value based sectors and they have also gone down the capitalisation chain. So, quite surprisingly the FII holdings have increased in a majority of the Nifty midcap and Nifty smallcap index, more than 50% of those stocks have seen FII holdings increase over the last three months. So, clearly, we are finding favour, we are seen as a resilient market, but we are not fully insulated in case there is a global recession as we saw in 2008, we held our own for some time and then we were very much a part of the falling dominoes globally.

So, right now, we are looked at as an attractive market. The issue with Pakistan has made the environment partly cloudy with more or less a guarantee of some kind of rain. Now, how widespread is that rain becomes an issue and given that there could be some hold back from FIIs wanting to come into the country, they would like to see how things work out and then again…, but the fundamentals of the Indian market remain quite good. Valuation-wise we were never cheap, we were at a premium, but now we are quite reasonable given the outlook and given what we offer in a very volatile world.