‘Sec­tors Linked to Do­mes­tic Econ­omy Likely to Do Well, Go­ing For­ward’

Munot be­lieves exit poll pre­dic­tions of sta­bil­ity at the Cen­tre spell good news

The Economic Times - - Markets & Finance -

Mar­kets have ral­lied 1,000 points in the past two days. Though some of the pos­i­tive news has al­ready been fac­tored in, the im­por­tant thing to look out for would be a sta­ble govern­ment at the Cen­tre that can un­leash the right set of eco­nomic poli­cies that can have a longterm im­pact on mar­kets and econ­omy, said chief in­vest­ment of­fi­cer at SBI Mu­tual Fund, who man­ages funds over .` 65,000 crore, in an in­ter­view to ET’s Biswa­jit Baruah. Edited ex­cerpts: How do you ex­pect mar­kets to re­act, post exit poll re­sults? Is there any upside left for mar­kets or most of the news has al­ready been dis­counted? If you look at mar­ket his­tory dur­ing the elec­tion pe­ri­ods of 1985, 1991, 2004 and 2009, the mar­kets were quite volatile. And this time, given the ex­pec­ta­tions of elec­tions, the mar­kets have moved up quite a bit ahead of fi­nal re­sults. To some ex­tent, the pos­i­tive news has al­ready been dis­counted. The most im­por­tant thing is there should be a sta­ble govern­ment at the Cen­tre that can un­leash the right set of eco­nomic poli­cies which can have a longterm im­pact on mar­kets and econ­omy. Do you think we are in the mak­ing of a great bull mar­ket? The bull mar­ket has al­ready started around last year. We were quite pos­i­tive on the mar­kets since the Nifty had hit a low of 5,000 lev­els. We had a pro­longed pe­riod of slow­down in eco­nomic and cor­po­rate prof­itabil­ity. I think that cy­cle is chang­ing for good now. The exit poll re­sults in the past have not been ac­cu­rate. Thus, if the fi­nal ver­dict is of a frac­tured man­date, how do you think mar­kets will re­act? If the mar­ket ex­pec­ta­tions are not met, then most of the re­cent gains are likely to be re­versed. How­ever, the exit polls are show­ing that we are go­ing to have a sta­ble govern­ment at the Cen­tre, which is a pos­i­tive. Which are the sec­tors you would ad­vise in­vestors to cur­rently bet on? In the past few years, given the macro chal­lenges, in­vestors have fo­cussed on de­fen­sives and the sec­tors that have ben­e­fited from the weaker ru­pee. Now, with the re­vival of do­mes­tic econ­omy and the federal pol­icy ini­tia­tives, the sec­tors linked to do­mes­tic econ­omy are likely to do well. I think con­sumer dis­cre­tionary and rate sen­si­tives would be the sec­tors I will look at. More­over, I think you need to have a broad-based in­vest­ment hori­zon, one can look at mid­caps where there is po­ten­tial for an upside. The mid­cap in­dex is still trad­ing far be­low its peak of 2008, how do you see this space per­form­ing? In the past cou­ple of years, in­vestors have fo­cussed on a nar­row uni­verse of large caps, but with the bot­tom­ing of macroe­co­nomic and cor­po­rate fun­da­men­tals, the whole mid­cap space is look­ing very at­trac­tive. Do you think tech­nol­ogy and phar­ma­ceu­ti­cal stocks will fur­ther come un­der pres­sure? If large cap­i­tal flows put up­ward pres­sure on the ru­pee and sec­tor ro­ta­tion takes place, then these over-owned sec­tors by the in­sti­tu­tions would see some im­pact. Hav­ing said that, af­ter cycli­cal stocks have run-up quite a bit, some of the IT and pharma com­pa­nies are look­ing at­trac­tive.

Navneet Munot,

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