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"Earlier rural sector was not doing well. Now rural sector based on good monsoon and good crop, it is shaping up quite well and also urban sector is not doing that well but things will revive there also, festival season is coming, maybe two-three months from now," says Alok Ranjan, ITI Mutual Fund.
What is your sense on the market? While there is a big question mark still on tariff. One was hoping that July 9th would finally be the grand finale, but does not seem to be the case. What cues do you think are going to push the markets forward now?
Alok Ranjan: See, if you see valuations, so in terms of valuation markets is almost fairly priced. And if you see our GDP growth and inflation, then nominal GDP growth has come down below 10% and maybe it will be remaining around 9% to 9.5% because if you see, 6.5% GDP growth and 3% inflation, so that is what we are expecting. Because of that there is no demand pull in the market although government has done a lot and also RBI has cut interest rates, so a lot of things have happened. So going forward maybe it will have some positive impact. But as of now, we are just bracing for good days to come.
But markets are also looking forward to the earnings as well. This time not much expectation that they already building in. But give us your sense, any sectors that you are keenly watching out for which can really be the outperformers this time.
Alok Ranjan: I mean consumer sector is going to do well and that is what we all have seen in the numbers also panning out. But what I am really watching keenly is banking and financial services sector because credit offtake has gone down and it has come down to almost 9% and it is very difficult to imagine that it can go down further. So, based on that, things will start improving from hereon and if you can see six months beyond from now, then maybe we will get credit offtake around 11% or 12% and that is what most of the banks also are talking about. So, depending on how do you want to position your portfolio, maybe financial services or sometimes banking can become quite attractive for one to two years perspective from hereon.
But within the consumption basket, what is giving comfort to you right now? Is it the beaten down valuations at this point in time or is it the kind of numbers that the companies are already coming out with because for now we are just seeing that the companies are having a growth in single digit as well. So, any particular segment within the consumption basket you want to flag off.
Alok Ranjan: I mean, if you see classical portfolio theory, it can be a good time to buy stocks when they are not looking very attractive and future looks better. So, if you see this consumption sector, it has not given much return in the last three years and also, if you see growth is almost bottoming out and if you see recent numbers, then things are looking much better than what it has done in the past, so based on that and also as I said, government’s focusing is on consumption.
Earlier rural sector was not doing well. Now rural sector based on good monsoon and good crop, it is shaping up quite well and also urban sector is not doing that well but things will revive there also, festival season is coming, maybe two-three months from now.
So, based on all this, things can look much better than what they are looking right now. And, of course, valuation has corrected, over last two-three years if you see valuation, then it has corrected quite a bit. So, maybe it can be a good time to look into consumer sector.
From your latest fact sheet, I understand that you are overweight on healthcare. Could you tell us within the healthcare basket, what are you liking at the moment? Is it hospitals? Is it diagnostics? Where are you placing your bets?
Alok Ranjan: Hospitals are looking quite good. They have done quite well in the last two-three years and still the track is quite big where companies can perform and we have definitely got good talent in India and story is panning out quite well. Lot of patients are coming from outside because of our cost competitiveness and at the same time our quality is quite good. So, based on all this, healthcare sector is looking quite good and that is where we are overweight in the past and it will continue.
Similarly, what is it that you would currently recommend avoiding in the market, where you do not see either earnings growth or there is valuation discomfort?
Alok Ranjan: See, capital goods sector where right now we are overweight, it has done quite well in the last three-four months. It was kind of a contrarian bet and that has worked out well. But unless and until growth comes up, that is where things may be fairly priced now.
Basically, my view is that one has to be bottoms-up in this market. There are not very clear pockets of undervaluation where one can just go whole hog and invest and remain overweight, at the same time there are not very expensive sectors also but there might be some pockets. Like it is also looking fairly priced. Capital goods, I mean, stock to stock one can take a call but valuations are definitely they have become quite rich.
Let us be a little more specific now. In terms of your latest additions and deletions if you can just help us with some more sectors that you want to flag off because we did talk about FMCG, IT, and consumption basket. But other than that, any of your latest additions and deletions you want to mention?
Alok Ranjan: I think cement sector is going to do quite well, so that is something looks good. Then, automobile sector, it has not done well, but going forward it is going to do much better. Interest rates are going to be down and also I am expecting maybe one or two more rate cut post October, November when in US also most possibly we are going to have some rate cuts. So, automobile sector can be looked into at current valuations. IT sector could be another opportunity but that is where again things are looking a bit circumspect and maybe we will have one or two quarters of lull based on whatever is happening in US, but that is where also we can get some opportunity because valuations have started kind of looking attractive.
English (US) ·