There is a famous saying in the market: you sell in May and go away. Do you think this time it will be applicable to the Indian market?
I don’t think so. We are long-term fund holders and we will stick to long-term investments. The policies that the government has announced are also for the long term. So, we will not sell, instead we are looking forward to buying.
Which sectors do you prefer?
Consumption driven, automobiles and financial stocks are looking favourable. Within financials, we prefer private sector banks. Other than these two sectors, we are looking at fast-moving consumer goods (FMCG) stocks as well.
Are you not concerned on the valuations of private sector banks and FMCG?
Yes, but if you look at the growth that is being provided in these sectors, and if you dissect that growth between volume and pricing, there is scope for these stocks to get even more expensive. I think expensive valuations will be justified because of the consistency that they offer.
There has been a slowdown in rural consumption and both these sectors depend on the rural economy for growth. So what makes you bullish on these stocks?
I am not of the view that the majority of these companies only depend on the rural market. Some products are for rural and some are for urban markets. On a relative basis, if you look at opportunities for growth, it is still a preferred sector. If you look at other sectors, volume will be an issue in all of them. For example the cement, steel, telecom and capital goods sectors. In the cement sector, there has been no volume growth at all. The telecom sector has been plagued with regulation issues. In the capital goods sector too imports have come down. So these (FMCG, auto and private sector financial stocks) happen to be the
preferred choice because of all these reasons. Once growth comes back in other sectors, we will have no issues investing in them.
Within the automobile sector, do you prefer two-wheelers or four-wheelers?
We prefer four-wheelers. In the two- wheelers sector there is a lot of competition where supply is more than demand.
We talked about telecom. It has been in the news lately. How do you rate them from a three-year perspective?
I think Internet data consumption would require higher per capita income. Even though data consumption is growing at a faster pace than voice calls, voice constitutes 80 per cent of revenue for telecom companies. We are not playing the voice growth story, we are playing the data story through tower companies and not telecom companies. Whether the growth comes through voice or data, tower companies will be positively impacted. Though telecom companies have spent a lot during the auctions,
the capital expenditure will not stop here as they will have to invest in building towers. To my mind, it will be much safer to play on tower companies and beat the index than play on the riskier telecom companies.
Pharmaceutical stocks have been the darling of investors up till now. In 2015, sentiment on these stocks has turned cautious. What is your view on the stocks?
We played the pharmaceutical story very well till the last year. Last year we were disturbed by the number of notices given by the US Food and Drug Administration (US FDA) to Indian pharma companies, so we reduced our weightage in that sector. But the market has moved up after we reduced our weightage. We are not going to be overweight on the sector.
Where would you see Indian market in next 12 months?
I am expecting a 10 per cent return by March 2016. It will underperform as compared to 2014-15 because there are big worries on credit growth and corporate profitability. ♦