Siddharth Bothra of Motilal Oswal AMC
Motilal Oswal AMC feels domestic plays such as pharma, consumer sub segments, logistics and import substitute are relatively safer sectors, Siddharth Bothra says in an interview to Moneycontrol.
On the banking, given the cautious approach to growth by most PSU banks over the last few years – the probability of any new major near term asset shock looks low. To that extent the sector is relatively better placed compared to its past, he believes.
The fund manager at Motilal Oswal AMC with more than 17 years of experience in research and investments, who handles Motilal Oswal Focused 25 Fund, says the auto sector outlook continues to look attractive for the medium term. Last few years, given the lower utilization, raw material cost push and regulatory cost burdens, the margins of the sector are also at cyclical lows.
After considering the data points, do you expect the recession, if any, is going to be limited?
It is difficult to predict such macro related global issues. Given there are so many variables at play, the probability of predicting the final outcome is very low to negligible. Even if one were to reasonably predict few variables, the final investment outcome could be impacted by some completely random unaccounted variable.
Hence, we do not spend much time trying to predict these global top down macro issues. Rather our effort is on finding few relatively insulated bottom-up investment ideas.
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What are the safe haven sectors at this point of time?
The risks seem higher today for businesses which are (1) dependent on global demand for their growth, (2) have higher exposure in key challenged markets, (3) have high energy dependence to execute, (4) high external currency leverage or (5) dependent on an abundant liquidity environment for funding/ survival etc.
We feel domestic plays such as domestic pharma, few consumer sub segments, logistics, import substitute plays etc are relatively more insulated.
Do you still expect robust rally in auto space even after strong run in the past eight-odd months?
Automobile industry is coming out of a major downturn. Many of the key auto sub segments are even today significantly below their CY18 peak volumes such as commercial vehicle’s, 2-wheeler, 3-wheeler etc.
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Last few years, given the lower utilization, raw material cost push and regulatory cost burdens, the margins of the sector are also at cyclical lows. Hence, we believe that the auto sector outlook continues to look attractive for the medium term.
Do you expect significant growth in housing finance sector?
The mortgage market in India is still underpenetrated. Few secular trends are likely to further aid the sector to sustain its high growth such as, shift from unorganized to organized economy driven by regulatory reforms, increasing use of technology and availability of better customer risk profile ranking analytics.
Do you think PSU banks are better placed now and good to be added to the portfolio?
Most PSU banks have been undergoing multi-year repair work on their balance sheet, to account for the high NPA’s from the FY08-12 cycle. This exercise now seems more or less complete for most banks.
Furthermore, given the cautious approach to growth by most PSU banks over the last few years – the probability of any new major near term asset shock looks low. To that extent the sector is relatively better placed compared to its past.
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