‘Sectors Linked to Domestic Economy Likely to Do Well, Going Forward’
Munot believes exit poll predictions of stability at the Centre spell good news
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.