Anup Maheshwari, Executive Vice President & Head - Equities, DSP BlackRock Mutual Fund
Growth risks are rising and the currency is continuing to
remain weak, there has been some respite as primary inflation moderated and
global commodity prices corrected somewhat. This should help moderate the core
inflation going forward and have a positive effect on India's economy. We at Capital
Market interacted with Mr. Anup Maheshwari, Executive Vice President & Head
- Equities of DSP BlackRock Mutual Fund, to know the factors which would lead
the Indian equity markets in Calendar Year (CY) 2011.
Here are the excerpts:
In Calendar Year (CY) 2011, growth across the world slowed
down. Will CY 2012 be better or growth will slow down further? More
specifically will India growth fall to 6-6.5% with policy paralysis and foreign
capital flight continuing?
Given that the second quarter GDP number was sub 7%, we
believe that India is currently experiencing a slowdown in growth. India is
slowing due to the tightening of monetary policy to bring inflation under
control. Further, the slowdown is driven by a dip in investments largely due to
a more uncertain global backdrop. Therefore, looking ahead, growth is expected
to remain muted as export growth also eases in response to slower external
demand.
While growth risks are rising and the currency is continuing
to remain weak, there has been some respite as primary inflation moderated and
global commodity prices corrected somewhat. This should help moderate the core
inflation going forward and have a positive effect on India's economy.
Furthermore, unless there is a concerted effort to find a solution to the
current crisis in the Euro-zone, the global markets will remain volatile and
continue to negatively impact market sentiment and growth.
Industrial capex seems to be showing mixed signs across
various industries, what's your view on this theme's market performance in CY
2012? Which are the sectors appearing attractive to the fund managers going
forward in CY12?
At this time, we do not envisage any major revival in
industrial capex in CY 2012. In fact, industrial capex has been relatively slow
since 2008 and continues to hinder the growth of the overall economy. In
addition, policy reforms continue to remain sluggish and therefore challenges
with regards to land acquisition, mining, and infrastructure continue to
persist.
Going forward, we do believe that interest rate sensitive
sectors will appear attractive as the RBI has indicated that there will be a
pause in interest rate hikes. Therefore barring any major systemic shocks, we
may consider adding selectively to these sectors.
With Euro debt issues pressurizing global banks and NPAs
piling up on Indian PSU banks, how will the finance sector perform in the
Indian markets in CY 2012?
We believe that much of the negative news regarding the
financial sector has been priced into the Indian PSU banking stocks. Besides,
they are currently trading below their historical values. Furthermore, the
challenges currently facing the Euro-zone have little bearing on Indian PSU
banks and NPAs as Indian PSU banks do not have much exposure to the Euro-zone's
sovereign debt. Furthermore, in our view the difficulties facing PSU banks
relate more to the credit quality concerns which are driven by a slowdown in
the economic cycle and a higher interest rate scenario. Therefore, banks which
have a higher exposure to infrastructure (power in particular), agriculture and
SMEs could face some headwinds going forward.
Midcaps/smallcaps have been crushed very hard in CY 2011.
What is your view on their market performance in CY 2012? Which are the sectors
within this space that investors should invest or accumulate? What is your
outlook?
In our view mid/small cap companies can do well in CY2012 if
they have strong business models and cash flows as well as low leverage.
However, our preference is towards large cap stocks as they have historically
maintained strong cash flows, high-quality management teams, and stable balance
sheets. Furthermore, in light of high interest rates, companies with limited
leverage will have the capacity to generate higher returns and may be more
attractive investments.
What Sensex/NIFTY level do you foresee at the end of CY 2012
and which stocks/sectors/themes will be the major drivers for the rise/fall
vis-à-vis end-CY 2011?
For FY 2013, we expect earnings growth to be near 13-15%
despite the current and near-term volatility in the Sensex/Nifty. We are
bullish on Information Technology, Healthcare and Financials sectors.
How can investors choose between different avenues in the
equity category? Also what are the returns that can be expected from them going
forward in CY12?
During volatile market conditions, a portfolio comprised of
large cap companies could be a more attractive investment for investors. Due to
the fact that the companies in this universe have achieved scale, have good
management resources, and generally are leaders in their industry categories,
they are better able to sustain growth during volatile times. As such, the
performance of large cap companies may potentially provide for a 15% CAGR over
the long term although these returns may not be linear.
In India, consumption theme has outperformed all other
themes over the past couple of years. Will the trend continue in CY 2012? Can
India's outsourcing theme outperform other themes in CY 2012?
Yes, consumption will continue to be a positive driving
factor to GDP growth in India in CY 2012. Although we have seen some slowdown
in the sales of high value goods, rural demand continues to remain
strong.
Although the outsourcing theme will continue to be one of
the drivers for India's growth, we perceive a large opportunity in the
pharmaceutical sector (through CRAMS). Within the next two to three years, many
revenue generating drugs are losing their patent licenses in the US, giving
Indian pharmaceutical companies the opportunity to make generics and enter the
market. We also believe that automobile/auto-ancillary business will also
drive growth along with the Information Technology sector.
Infrastructure remains a major laggard. With
policy/execution/reform paralysis in government and high interest rates, what
is your view on this segment's market performance in CY 2012?
The infrastructure segment will remain under pressure in CY
2012 as there have been no major projects announced within that space.
Furthermore, we do not expect any new developments or announcements in the
near-term in this sector given the high interest rates and the demand slowdown
due to a weak global economic environment. However, beyond CY 2012, we believe
that the sector has the potential to be a strong out performer in the
investment cycle that will follow.
Source: http://www.indiainfoline.com/Markets/News/We-Are-Bullish-On-Information-Technology-Healthcare-and-Financials-Sector/4077527762
No comments:
Post a Comment