May 14, 2013, 01.39 PM IST
Bhuvnesh Singh, head of research at Barclays Capital says at Barclays they are overweight on healthcare stocks, some pharma stocks like Sun Lupin. They also like Cairn India and BPCL from the oil and gas sector.
Both European and US investors are very positive on India, but with elections not too far and the uncertain political scenario, they are hesitant to invest heavily in the country. That’s the view coming in from Bhuvnesh Singh, head of research at Barclays Capital.
Singh, back from touring European countries, says investors are waiting on the sidelines for more clarity on the political front, after which one can expect India to attract huge FII inflows.
Talking sector-specific, Singh says he is overweight on the four-wheeler pack, expecting interest rates easing by another 75 bps in the next six-nine months.
Barclays is also overweight on the healthcare sector, Lupin , Sun Pharma and Apollo Hospitals are its top bets from the space. “Investors find consumer stapes more expensive than healthcare stocks, so they prefer latter than former.”
Below is the verbatim transcript of his interview on CNBC-TV18
Q: You have been on a trip talking to a lot of European investors. What’s the general feedback you came away with?
A: I have been out for last three week talking to European and US investors. Both the European and US investors remain very positive on India. They are looking at interest rates coming down, they are looking at inflation numbers, they are looking at positive sound from the government and they are looking at gold and oil prices coming off.
On the other hand, given that election in India will be just next year that is holding back their hands. There is a lot of uncertainty about the politics in India, which is why most investors are unwilling or hesitant to commit significant sums to India right now.
So, net-net, they are waiting on the sidelines. As we see political certainty coming, I am sure that a lot more inflows could come to India at that time.
Q: Any colour that you can fill in terms of the kind of investors you saw at this congregation. Were they mostly old India investors, are they long only investors or are these Exchange-Traded Fund ( ETF ) trackers who are looking at the region, and how much to allocate in India in that context?
A: The meetings were all across though the majority of investors would be long only; a mix between old India investors versus regional and global guys who are looking at how much to allocate to India.
The concerns on politics and the positives on the recent government statements and positives in terms of oil and gold prices coming off - that is all across. So everybody understands simple things about India.
Q: There was quite a debate about consumer discretionary - a space that actually only till recently was the biggest overweight for foreign institutional investors (FII). What are they making of that space and what do they expect to see in terms of earnings performance from that pocket?
A: Consumer discretionary is an interesting space. We are seeing four wheelers, where the car sales numbers in India are not that good. We are seeing two wheelers, where we are seeing significant competition. So in that space, it is very difficult for FIIs to suddenly become much more aggressive. Tata Motors is a completely different case. It is not that much India focused.
So. there is a lot of debate based on how the numbers continue to look for in this sector say for next six-nine months. Specifically, if we see GDP growth rate correcting; last quarter was bad and in this quarter we might very well see expectations trending down. So, investors are confused.
Our view is that consumer discretionary specifically four wheelers should be overweight. We are taking a call on interest rates coming off sharply over the next six-nine months probably to the extent of 75 basis points in India, and that would give a lot of support to this sector.
Q: One sector which seems to be generally overweight in most portfolios is banking. Did you find that in your trips with most investors or your talks with most of them? What were you advising them on that sector specifically?
A: Banking sector is facing a conglomeration of various issues if I would say. We like the sector, specifically the private sector banks and that is one space which we would like to be in.
Though, on the other hand, with the GDP growth rate numbers most likely disappointing over next three-four quarters, it is difficult to be significantly overweight in this sector.
Our view to investors have been to stay away from public sector banks and to focus more on private sector banks and keep a market neutral position on this. Top picks of course would be banks like HDFC Bank or Axis Bank for example.
Intermediate top in Nifty is probably in process. Markets may move towards distribution or correction; Monday may have seen an exhaustion gap in Nifty
ALL GOOD THINGS COME TO AN END. The rally in Nifty which started from 5975 and touched 6415 may now be coming to an end. Fresh buying should be done only after some downward movement in prices has taken place.
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