❝We ex­pect mar­ket to cor­rect or re­main flat­tish in sec­ond half of FY18❞

- PVK Mohan, Head Eq­ui­ties , Prin­ci­pal PNB As­set Man­age­ment Com­pany

Dalal Street Investment Journal - - COVER STORY -

What can you make of the re­cent mar­ket cor­rec­tion? Have mar­kets cor­rected enough?

Against the back­drop of the chal­leng­ing geopo­lit­i­cal sit­u­a­tion, Q1FY18 re­sults, which were slightly be­low ex­pec­ta­tions, and val­u­a­tions above the long term trend, we be­lieve the In­dian mar­kets could cor­rect a lit­tle more.

What are the chal­lenges faced by fund man­ager to beat the bench­mark index? How con­fi­dent are you in beat­ing the bench­mark in­dices in com­ing years?

It is dif­fi­cult to pre­dict fu­ture per­for­mance, but our funds have con­sis­tently beaten their bench­marks over the last sev­eral years and it is our en­deav­our to do so in fu­ture too. The key chal­lenge in beat­ing the bench­mark index in the cur­rent mar­ket sce­nario is due to the fact that stocks have been cor­rect­ing but the index has not fallen cor­re­spond­ingly; each time dif­fer­ent stock/sec­tor helps cur­tail the down­side in index and it is dif­fi­cult to keep chang­ing the port­fo­lio fre­quently in tune with the short term mar­ket trends

What is your out­look on earn­ings in com­ing quar­ters and how would you view the Q1FY18 re­sults in par­tic­u­lar? Any scope for earn­ings up­grade?

As high­lighted ear­lier, the re­sults for Q1FY18 were tepid and slightly lower than ex­pec­ta­tions in part due to un­cer­tainty ahead of GST. We ex­pect the re­sults in sub­se­quent quar­ters to im­prove, more so in the sec­ond half of FY18 which would be aided by de­mand pick-up and low base of H2FY17. The prospects of earn­ings up­grade is ex­pected be bet­ter in the sec­ond half of FY18

What kind of re­turns can one ex­pect by in­vest­ing in eq­uity di­ver­si­fied mu­tual fund over three to five years?

We be­lieve re­turns from eq­uity mar­kets could be around low teens over the next 3-5 years In which sec­tors do you see value in mar­kets? We con­tinue to be­lieve that there are greater op­por­tu­ni­ties in the do­mes­ti­cori­ented sec­tors and se­lec­tive op­por­tu­ni­ties in the ex­port-ori­ented/ global sec­tors. Some of these in­clude sec­tors such as auto/auto an­cil­lar­ies, ce­ment, fi­nance and con­struc­tion.

The first half of this year was good for eq­uity mar­kets. Will sec­ond half mimic first half's per­for­mance? What are the key fac­tors to watch out for in the sec­ond half?

It would be dif­fi­cult to repli­cate the per­for­mance of H1CY18 in the sec­ond half. We ex­pect the mar­ket to cor­rect or prob­a­bly re­main flat­tish for the sec­ond half, al­though there could be pe­ri­odic bursts of ral­lies and corrections. The key fac­tors to watch out for would be de­mand en­vi­ron­ment post-gst im­ple­men­ta­tion, geopo­lit­i­cal en­vi­ron­ment, re­sults for the re­main­der of FY18 and in­ter­est rate out­look glob­ally and lo­cally.

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