StanChart MF sees symbolic CRR hike

Rajiv Anand, Head-Investments, Standard Chartered Mutual Fund, sees a symbolic CRR hike than a massive CRR and Repo rate hike. He said the fund is actually looking at NBFCs catering to the semi-urban and rural space.

Excerpts from CNBC-TV18’s exclusive interview with Rajiv Anand:

Q: Comment on the entire macro situation right now with inflation being where it is and we are just getting in numbers from China as well. What is your own assessment of policy action from hereon?

A: Dr YV Reddy’s comments are quite interesting. He is basically differentiating between liquidity management and monetary policy or management. Reddy is basically saying that MSS and Liquidity Adjustment Facility, or LAF, is liquidity management and should be seen as such. Any measures in terms of CRR or repo rate hike should be seen as monetary measures to contain inflation. One needs to see both separately.

Q: In light of what Dr Reddy has said, do you get the impression that you may expect a CRR and repo rate action from RBI on April 29?

A: If RBI was worried, then it could have easily raised CRR as well as the repo rates by now. Last year, they raised CRR on March 31. So, RBI now needs to do something perhaps a little symbolic to ensure that they seem to be doing something in terms of monetary policy to contain inflation.

On the other side, you are seeing growth numbers ease off. Going forward, those numbers could come off even further. For all practical purposes, the number one reason why growth is coming off is account of higher interest rates in the economy. To that extent, it is a balance between the two. We would get a symbolic hike perhaps in CRR rather than a sledgehammer in terms of a big CRR and a repo rate hike.

Q: What is the confidence with which your AMC is launching this fund? Do you think there is a lot of appetite despite the kind of sell-offs or outflows one has seen from FIIs? Do you think that subscription levels will be high?

A: The fund continues to be open for disciplined investors for SIPs and STPs. We are now opening it for regular investment and are looking at a finite amount over a period of time, because we have enough ideas at reasonable valuations to build this portfolio. This portfolio is being built in a step function basis as and when stock ideas hit us. We believe we have enough ideas to invest any incremental money going forward.

Q: What are some of these ideas and how have they changed over the last one-year in terms of valuations? What sector is starting to look attractive and not so attractive?

A: The core of the portfolio is in financial services, despite the sell off that we have seen over the last few months. Even if interest rates do begin to go up, the pricing power exists within financial services. This is an area that certainly makes sense. Per capita incomes are going up, then the whole intermediate game in the financial services sector should clearly benefit.

We are trying to build a portfolio with companies within an opportunity set, which are relatively young such that over a period of time they would become market leaders. To that extent, we are actually building a portfolio within the agri space. It is a play on the high commodity prices that you are seeing today. You will see farmers with greater levels of wealth and who should be in a position to use micro-nutrients, better quality seeds, and fertilizers.

Q: Would there be a preference for PSU banks or private sector banks?

A: We are actually looking at NBFCs particularly catering to the semi-urban and the rural space rather than a straightforward public sector or private sector bank.

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