We may be at the beginning of a multi-year bull run: Lalit Nambiar
Interview with senior vice president and fund manager (equities), head - research, UTI Mutual Fund
January 5, 2015 Last Updated at 14:44 IST
In the midst of markets picking up pace in the new calendar year Lalit Nambiar, senior vice president and fund manager (equities), head – research, UTI Mutual Fund, tells Tulemino Antao that any correction will be an opportunity to enter for the medium term to long term
What is your call on the market in the near to medium term and what strategy can one adopt at current levels?
Global news flow indicates volatility and thus a correction of 7-8% cannot be ruled out. But for a disciplined long-term investor this would be a good time to enter. Equity markets never move in a straight line, corrections are inevitable scenarios in a bull market. Our studies of previous bull markets indicate that as this the bull market coincides with a cyclical economic recovery, it could likely run over more than two-three years. In other words we may well be at the beginning of a multi-year bull run based on macroeconomic tailwinds. So any correction will be an opportunity to enter for the medium to long term.
What trends do you see for capital intensive sectors after December factory growth picked up pace?
The long term economic trajectory is favourable for the segment as a whole but one must differentiate between industries. There are early cycle plays such as cement and construction and late cyclical plays such as heavy equipment and they have to be treated differently. There are very early signs of pick-up in sectors like roads and infra which should result in some eventual recovery in capital intensive sectors. Market sentiment usually runs ahead then corrects and then recovers provided the early promise of business and earnings recovery is not belied. We feel that with the economic cycle bottoming out, demand (thus volumes) and eventually profits will step in to defend any correction in some of these stocks. That said it is better to go for strong companies, doing badly due to overall demand than trying to ace the market by punting on special situation stocks.
Despite the recent interest rate hike by Russia, its currency seems to be on a weak trajectory. What impact do you see especially on pharma companies exporting to Russia?
Listed corporate India's overall exposure to Russia may not be much. In pharma, there are a few companies with a chunky exposure to Russia and some to Latin America but barring those there is no major issue in the sector. The rest of Indian pharma is largely exposed to the US and domestic sales, so there seems to have been an overreaction in the market or it could just be an excuse for a correction.
In a bullish market generally defensive sectors such as pharma and FMCG take a back seat. What would be your advice to an investor who wishes to invest in defensive sectors?
Their cash flows are steady and business models are resilient. Long term they are always good bets given their franchise values. But valuations are also important, at present one will have to be very choosy about the stocks to be bought in this space. It may make more sense to invest in a defensive fund such as those playing a consumption or lifestyle theme.
Among the rate sensitive sectors such as auto, realty or bank, which sector seems to be most compelling at current levels and why?
Given the way the economy is likely to recover, we like banks and auto at this stage. As demand recovers, banks will lead through increased credit growth. In auto pent-up demand in cars and policy action in demand segments for commercial vehicles should help see volume pick up.
What would be your strategy for retail investors who have missed out on the current rally with regards to investment in mutual funds in the new year?
At the risk of sounding simplistic, it is important to diversify, so I think it will always be important, irrespective of market level, for retail to increase participation mainly through large cap diversified equity funds with smaller allocation to sector funds such as banking, auto and infra balanced by some exposure to consumer and healthcare thematic funds.
http://www.business-standard.com/article/markets/we-may-be-at-the-beginning-of-a-multi-year-bull-run-lalit-nambiar-115010500368_1.html
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