FMCG sector capable to sail through tough times: Bowen Cap

Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: What is your view on HDFC post accounting methods issues and worries about removal of pre-penalty by the regulators?

A: We maintain a positive view on the stock. In the last quarter their loan book grew by 25% despite low GDP growth from 9% to 5%. They are weathering the storm well, maintaining spreads and keeping their cost under control. We have a no long term issue over the business. The prepayment issue is not a factor to raise more components. The management of HDFC has responded to the analyst’s report.
 
Q: What is your view on Infosys and Bajaj Auto?

A: Infosys results have disappointed not only in one but few quarters. They have highlighted the challenges that they are facing in terms of discretionary spend within the banking and financial space in the US and their peers have echoed the same comment too. But Infosys has faced more brunt then their peers.

However, we are still holding a long-term view because they have good management, capabilities to come out stronger, order visibility in pipeline and reasonable hiring activity. This quarter may not be so great but hopefully things should pick up in next couple of quarters and if they don't then we really need to take a relook at the investments.

On Bajaj, the domestic market is struggling but we are positive on their export business and with the current rupee valuation it is a once in a life time opportunity for many Indian companies to localise their capacity and export much as possible.

Bajaj has a good market share in many African markets, Latin America and other markets related to LatAm and Philippines. Currently, there is hiccup in Sri Lanka but its very short term in nature. Even if the domestic market is slowing down on the other hand export is on the upside and then when the domestic market picks up, they would have locked in their exports future sales in FY14 at about 55-60. So, overall we expect a fantastic next year.

Q: Any other sectors that are compelling or attracting your interest at this juncture? Would you be on the prowl for a buy at this period at all?

A: One need to focus on the visibility and companies that are doing well and unfortunately many of these companies are in the consumer sector and they are trading at 20-25 times. So, if you really need to get in you need to have the comfort level that volume growth will continue in these tough economic times and they will have pricing advantage. That is the reason we are holding on to Jubilant , Titan because we feel they are able to do that.

Q: Will you invest in infrastructure where the visibility is low but a lot is dependent on government action or not yet?

A: Infra sector at the moment is a wild card. It is best to pick the company which has a good balance sheet, can self invest and don't need external borrowing, and in this space only L&T qualifies this condition. L&T also has good business in the Middle East. Apart from L&T, one can look at BHEL as they are concentrated on one particular sector.

Q: Do you expect short term bounce in the Indian markets based on central bankers comments? They would come to aid if there is catastrophe in Europe. Likewise we are getting these hints of perhaps QE from the US as well. If that indeed were to happen is there a short term pop in the markets, do we get back to February levels at all on the index?

A: With the current slow growth rate the RBI really need to act on something to prop up sentiment. I would be surprised if they don’t do anything. There will be some global easing. In the upcoming G-20 meeting some coordinated action is likely.