Inflation strain could not subside quickly, extra price hikes probably: Parekh

HDFC Chairman Deepak Parekh on Wednesday hinted at the opportunity of extra rate of interest hikes by the Reserve Bank of India within the wake of the excessive inflation.

“The inflation pressure may not subside soon, increasing the possibility of further hikes into FY23,” Parekh mentioned on the annual common assembly of HDFC Asset Management Company.

“Rising inflation, however, remains a concern, prompting the RBI to undertake an off-cycle rate hike of 40 bps in May and additional 50 bps in June,” he mentioned.

“Going forward, there are reasons to be optimistic on economic growth, on the back of prospects of normal monsoon, pick up in discretionary spend, robust exports, improved balance sheets of corporate and banking sector and signs of revival in private capex,” Parekh mentioned. “Factors impacting growth outlook that need to watched out for include geopolitical conflicts sustaining for longer, tighter financial conditions, elevated commodity prices particularly crude oil and continued global supply-chain disruptions,” he mentioned.

He mentioned the yr passed by will likely be remembered as a yr of strong restoration and return to normalcy regardless of successive waves of the pandemic sweeping throughout main nations. However, continued disruptions in world provide chains and surge in demand together with the geopolitical tensions pushed inflation increased, prompting coverage actions by central banks, Parekh mentioned.

In India, the vaccination drive which began in late FY21, picked up tempo and over 80 per cent of india’s grownup inhabitants was vaccinated by yr finish. This helped scale back the social in addition to financial impression of the omicron wave in fourth quarter of FY22. Economic development in India accelerated in FY22, as restrictions eased and demand normalised, which was additional aided by enchancment in exports and supportive financial and financial insurance policies, Parekh mentioned.

According to him, regardless of the wholesome compounded annual development price (CAGR) of 16 per cent in AUM over the previous 5 years, the MF trade in India stays considerably under-penetrated in comparison with world averages. India’s MF AUM‑to‑GDP ratio stands at solely 16 per cent, in comparison with the worldwide common of 74 per cent. Our fairness AUM‑to‑market cap was at 6 per cent as towards the worldwide common of 33 per cent, he mentioned.