“We are overweight in the banking and financial space and do believe that there is room for this sector to deliver healthy performance going ahead,” Chandraprakash Padiyar, senior fund manager at Tata Mutual Fund said in an interview to Moneycontrol.
For the automobile sector, he said the chip shortage has been a boon for profitability in the sense that auto OEMs have focused on selling higher-margin products and margin delivery therefore has been better than consensus expectations.
However, valuations for the sector in general are not very attractive, hence Padiyar, with over 21 years of experience in research and fund management, would suggest a stock selective approach rather than a sector call. Edited excerpts:
Do you think the macro issues that created a lot of volatility across the globe will persist?
Inflation linked to near-term supply chain disruption is likely to continue. However, a lot depends on how the war between Russia and Ukraine plays out. As things stand today, it does look like business activity may continue to get impacted adversely especially when it comes to higher commodity prices.
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An interesting point to highlight is that incrementally, margins for even the basic commodity producers are getting adversely impacted due to a weak demand scenario from countries like China.
The Indian stock market seems very resilient compared to global peers despite FII (foreign institutional investor) selling for the seventh consecutive month. Your thoughts?
Indian markets have behaved extremely well till date. If I take a three-year view, India is likely to be among the fastest growing economies in the world on the back of private capex pick-up, job openings coming from across sectors especially manufacturing and IT, along with higher salary increases and a continued pick-up in residential real estate.
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Short-term volatility in the markets due to global news flows can bring interesting buying opportunities for the long term.
What are the macro-insensitive themes you suggest for investors at this point?
Macro impacts all sectors or themes, some immediately and some with a lag. Having said this, I think manufacturing activity in India is likely to pick up considerably going ahead. India is a beneficiary of China-plus one and at the same time many sectors are globally competitive from a cost perspective.
Barring any unforeseen geopolitical event, job creation is likely to be very healthy going ahead meaning that there can be a broad-based economic pick-up leading to equity markets doing well in general over the medium to long term.
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Is it the time to go overboard on the banking and financial space?
We at Tata Mutual Fund are overweight in the banking and financial space and do believe that there is room for this sector to deliver healthy performance going ahead.
One sector that underperformed in little more than one and half months is information technology. What is your approach to the segment?
The business outlook for the IT sector continues to be reasonably positive over the next few years. All companies in the sector are looking to grow at double-digit rates for FY23.
From a stock price perspective, the sector surprised the markets during FY21 and FY22 on both top line growth and margin improvement, leading to a sharp rerating of valuations.
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In my opinion room to surprise positively incrementally is challenging and in fact margins delivery guidance in the near term is marginally lower than expected. We are seeing the excess valuation rerating being corrected as of now. It remains a decent sector for the long term.
The auto sector is one of the top three gainers, with a 17 percent rally since its March lows. Should one start adding these stocks or wait for some more time?
The chip shortage has been a boon for profitability in the sense that auto OEMs (original equipment manufacturers) have focused on selling higher-margin products and, hence, margin delivery has been better than consensus expectations.
Inventory levels are low and the order book remains very strong. However, valuations for the sector in general are not very attractive. I would suggest a stock selective approach rather than a sector call.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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