Rupee depreciation and recovery in the US economy would be a positive for IT companies says, Srinivas Rao Ravuri of HDFC MF. Moreover, he expects the impact of rupee depreciation to flow through for the sector in the coming quarters.
In an interview to CNBC-TV18, he says, the MF still has exposure both in PSU banks as well as private sector banks.
He says the upside in oil and gas space and the deregulation of petrol prices have benefited the oil marketing companies (OMCs) and expect good returns from them at these levels. He prefers OMCs over upstream companies.
Below is the verbatim transcript of his interview on CNBC-TV18
Q: The banking space has been suffering through all of last month - What you have done on your exposure to banking exposure because that seems to be the highest allocation for you guys? Are you lowering exposure to banking?
A: Not really. The banking weight in overall industry is also high, so one should not look at only banking exposure that mutual funds have but one should look at it relative to the weight in the benchmark. We are still having exposure to banking but there is a clear dichotomy in terms of public sector undertaking (PSU) banks versus private banks. We have more exposure to public sector banks and they have been hit but we still have exposure to PSU banks and private banks as well.
Q: What are you doing with your IT exposure right now in the light of recent news flow?
A: We maintain an equal weight in IT. Though rupee has depreciated quite a bit in the recent months, we have not seen that create an improvement in margins for IT companies as of now. However, the numbers seen from IT are pretty positive.
Overall, we would see the impact of rupee depreciation coming to IT companies in the coming quarter. This along with improvement in US economy and other economies should be positive for IT companies. Therefore, we like IT companies at this point of time.
Q: You have been increasing weightage in oil and gas as a segment, are you more bullish on the upstream or downstream part of the story?
A: We are more positive on the downstream side. Yesterday we saw petrol price increased by Rs 1.55, looks like we are set on deregulation path, which is a big positive. Along with that some of these companies also offer upside from the oil and gas space; that is why we like them because there is value, there is deregulation happening and so these companies can give good returns from these levels.
Q: What are you seeing with investor interest right now, do redemptions continue at the pace at they were happening a few months back?
A: Redemptions have slowed down. The investors are behaving much more maturely than what we have seen in 2007-08. The last few years have been extremely disappointing for retail investors as returns have been meager across equity and mutual fund equity funds.
Right now returns have not been good, so people are disappointed and taking out money but at the same time, in last three months we have seen gold giving shock to investors, and that has put more focus on equities.
So for the long-term, equity as an asset class in a country like India where we are still saying 12-13 percent nominal growth is great. Therefore, we from the industry are trying our best to see that this point is driven across and that is where outflows are not that much in the recent months.
Q: Focus in what way on equity - is it that people are not redeeming as much because they are loosing on other assets or on any fund are you beginning to see any incremental inflows or interest?
A: We had positive inflows in the month of June, so it is not that people are putting in big amounts but we continue to see money coming through the systematic investment plan (SIP).