See no sustained rally post trust vote: Quantum AMC

IV Subramanium, Director, Quantum AMC said that as long as GDP is higher than global averages, there is a case to remain invested in Indian equities irrespective of the political situation. “From a short-term point of view, you may find a bit of volatility depending on what happens tomorrow. But I don’t really think that there will be a sustained rally based on events that unfold tomorrow.”

He added that banks are definitely looking attractive if you look at the price to book ratios of some of these banks. “If I really look at the fundamentals and the type of credit growth we will have and the risk management systems some of these banks have put in place, I am quite comfortable buying into some of the better-managed private banks at this point.”

Excerpts from CNBC-TV18’s exclusive interview with IV Subramanium:

Q: How important is this political event? Are we just going to play for a knee-jerk reaction after tomorrow’s vote of confidence? Are there some long-term implications? What are the various scenarios that you are planning to play out depending on whether UPA wins or loses?

A: From a momentum investor’s point of view, this probably could be a significant event. But for investors like us who have a more long-term horizon, I don’t focus so much on political events.

In the last 25 years, we have had a few governments like this. Irrespective of such governments, we had a GDP growth that averaged greater than 6%. India can deliver that kind of GDP irrespective of whoever rules India or whatever kind of governments we will have. As long as that remains and GDP at 6% is significantly higher than global averages, there is a case to remain invested in Indian equities.

From a short-term point of view, you may find a bit of volatility depending on what happens tomorrow. But I don’t really think that there will be a sustained rally based on events that unfold tomorrow.

Q: If there is adverse news for the government and the confidence vote is lost, do you expect a fairly deep cut in the markets in the next three months as the country prepares for elections? What would you do at that time? Would be a buyer at all those dips?

A: If the market declines and stock prices become a lot more attractive than it already is today, people like us who have a longer-term horizon would definitely want to invest at those prices.

In such a declining market, buying a stock is like catching a falling knife and one may get cut in the process of buying into those stocks. But one needs to have the strength and the patience to buy further or at least hold on till the market recovers. It is very difficult to predict the bottom. Therefore at some price, one has to begin investing. At these prices, I am quite comfortable buying into the markets.

Q: If there is a rally in the markets because of the government managing to win the trust vote, would you stand by and not participate in that rally? What is your view on banking stocks? Are you getting a sense that with the way crude is behaving and the fact that inflation came in a notch lower than the previous week’s average, it would be time to buy banking stocks now?

A: Banks definitely look very attractive if you look at the price to book ratios of some of these banks. There are some headline risks that scare people. But if I really look at the fundamentals and the type of credit growth we will have and the risk management systems some of these banks have put in place, I am quite comfortable buying into some of the better-managed private banks at this point.

Q: Are there any results that have caught your eye so far from Q1 earnings?

A: I don’t really focus so much on quarter-to-quarter numbers. But in general, in the logistics sector, people like Concor that announced their results indicated that the economy is not as weak as one had anticipated and there seems to be reasonable amount of activity for decent growth over the next few years.

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