Trideep Bhattacharya of Edelweiss AMC
“We are positive on Indian equities over the next two to three years. In this context, we are positive on four themes including a rebound in credit growth and household capex demand that are reflected across our portfolios,” Trideep Bhattacharya, CIO, equities, Edelweiss Asset Management, said in an interview to Moneycontrol.
In line with this view, Edelweiss is overweight on the sectors wherein these themes manifest themselves.
However, the AMC has been cautious on the near-term outlook of mid-cap IT, consumer staples and utilities, said Bhattacharya. Edited excerpts:
How do you approach the equity markets that have been facing several macro issues and turned volatile?
We are approaching the market with a near-term outlook of being volatile and the medium-term outlook being constructive. We expect markets to remain volatile till we get clarity on the following:
> Early signs of inflation peaking
> An accurate gauge of interest rate trajectory globally
> Bottom-up green shoots of capex cycle
Do you think the rate hikes by the Reserve Bank of India (RBI) in coming months can slow credit growth for banks?
We believe initial rate increases are positive for equity markets over time as they reflect earnings buoyancy in the economy. In this context, we are positive on the credit growth prospects in the medium term as we see a reasonable chance of a private sector capex cycle over the next two to three years.
However, we keep an eye on the pace of rate hikes and hope that they don’t negatively impact the incipient earnings recovery in India.
Do you expect 10-year bond yields to cross 8 percent in coming months considering the RBI move?
While we don’t make specific forecasts on bond yields, we would surmise that they are headed up in the near term. In this context, we are particularly conscious of “valuation risk” in stocks, and are mindful of high valuation stocks in our portfolio.
Do you expect a significant impact of the sanctions on Russia on global growth?
Driven by sanctions or otherwise, if we have crude oil prices in the range of $ 120-plus by Diwali, it could lead to demand destruction globally. We watch incremental data points closely.
How do you approach the auto and realty segments if there are subsequent rate hikes in coming months?
We think we have to evaluate the pace of rate increases rather than rate increases themselves. In this context, a more calibrated rate increase is unlikely to disrupt the earnings momentum in these sectors.
What are the themes you like the most now that you feel have to be a part of the portfolio?
On net balance, we are positive on Indian equities over the next two to three years. In this context, we are positive on the following themes that are reflected across our portfolios:
>Rebound in credit growth
>Private sector investment demand
>Household capex demand
>Beneficiaries of government growth schemes and China-plus-one demand
In line with this view, we are overweight on the sectors wherein these themes manifest themselves.
Any specific sector or segment that you want to suggest investors to stay away from right now?
We have been cautious on the near-term outlook of mid-cap IT, consumer staples and utilities.
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