Naveen Kulkarni of Axis Securities
Over the next 12 months, consumer staples will continue to do well as elevated government spending, state elections, and inflationary pressures will enable good nominal growth for the staples sector, Naveen Kulkarni, Chief Investment Officer at Axis Securities PMS says in an interview to Moneycontrol.
With more than 15 years of experience in research and advisory functions across all customer segments, Naveen says that with the correction in prices over the last year, new-age tech stocks have become relatively attractive.
Also, many companies are now focussing on profitability which is a significant positive, he feels. Thus, the time to buy some of the tech stocks has arrived, he says. Excerpts:
Do you think the time has come to add exposure to consumer discretionary space and avoid consumer staples?
The consumer sector has delivered good returns over the last 12 months. However, consumer discretionary has been a mixed bag. Some segments, like hospitality, have seen a strong operating performance. But, categories like paints have seen tepid performance.
Over the next 12 months, consumer staples will continue to do well as elevated government spending, state elections, and inflationary pressures will enable good nominal growth for the staples sector. Thus, staples will do well, but consumer discretionary will continue to remain category as well company specific in the medium term.
Is it the right time to add new-age tech stocks to the portfolio?
New-age tech stocks have specific challenges which vary from one tech company to another. However, with the correction in prices over the last year, these stocks have become relatively attractive. Also, many companies are now focussing on profitability which is a significant positive. Thus, the time to buy some of the tech stocks has arrived.
What are the key challenges for the market right now and going ahead given more than one-and-a-half-month-long consolidation?
The key challenges for the market are the slowing growth rate in India and the probability of a global recession. While the market continues to consolidate at current levels as balance sheet quality has improved immensely across sectors, but growth challenges have emerged.
Valuations for Indian equities are reasonable compared to the long-term mean, but many foreign equities, like China, have become cheap. Thus, the market could continue to see an arbitrage play between Indian and foreign equities. Focus from here on will be on earnings growth, as that will be the most critical factor to driving performance.
Are you taking exposure to metal space, given the ongoing China reopening theme and expectations of strong Chinese growth in the coming quarters?
Metals as a theme has seen a revival as prices have moved up, but it has not been backed by activity on the ground. The economic activity, especially in China, is yet to come back to full steam. Thus, exposure to metals has to be more calibrated at this juncture as the time for metals is not fully come.
Your thoughts on CPI inflation and core inflation data? What do you think about the next step by the RBI rate-setting panel?
Inflation spike has surprised negatively, and it could spiral out of the comfort zone if the monsoon is weak, leading to a rise in food inflation. However, RBI has limited tools at its disposal to curb inflation. The rate hikes are yet to have their full effect on the economy. Thus, RBI will follow its planned course. Rate hikes from here on will be more calibrated as they risk severely slowing down the economy.
Do you expect FII flow to remain volatile in the current calendar year and DIIs to continue to support the market in the same period?
As stated earlier, the challenges of a global recession and the relative undervaluation of foreign equities entail volatile inflows. However, DIIs continue to see good inflows. Thus, this year will also be similar to last year of volatile foreign flows and support of DIIs to continue.
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