Overweight on India, check out Aberdeen AMC's top bets

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets HDFC BSE | NSE 31/05/12 Are Mutual Funds betting on HDFC? Other Stocks in this news ICICI Bank | Tata Consultancy Services | Infosys | CMC | MphasiS | Hero Motocorp | Bosch | Hindustan Unilever | ITC | Nestle India | Godrej Consumer Products |

It is a not a market for the chicken-hearted ones. Though Indian market is directionless and almost on a losing spree, some feel that this is the best time to invest.

Adrian Lim, Aberdeen Asset Management is bullish on India. In an interview to CNBC-TV18 he said, "We have been overweight on India for a very long time now and that's driven largely not from sentiments or macro economic development but largely from the quality of companies that we see and like here."

He prefers HDFC  and ICICI Bank in banking space. "Their lending book growth remains healthy, net interest margins pressure remain relatively benign despite the heavy hikes in interest rates over the last 18-24 months. So, even within sectors, there are positive areas", Adrian explains.

He still maintains 'hold' on Infosys and TCS . Besides, Adrian also likes CMC  and MphasiS from the midcap IT space.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: We have seen a lot of FIIs outflows (nearly USD 3 billion) in the August series. Are you witnessing any redemption pressures which could be leading to this kind of an outflow?

A: It has been a mixed scenario but we have had relatively steady levels of client interest in the regional portfolios. There is redemption in some of the small cap strategies and some of these are the single country strategies. But as a pool of money, we haven't seen material shrinkage coming to redemptions at this stage.

Q: We are hearing mixed opinions about how people are approaching India, what is your stance?

A: We have been overweight on India for a very long time now and that's driven largely not from sentiments or macro economic development but largely from the quality of companies that we see and like here. Hence, we remain overweight on the Indian market for our regional portfolios.

Q: We have seen a lot of damage in the Indian blue-chips in areas like banking and financials. Since you are invested in many of these blue-chips, which ones do you still think are good value considering their recent performances?

A: One cannot generalise which sectors are doing well and which aren't as sectors are quite patchy right now. Within the banking space, we like what HDFC and ICICI have been demonstrating. There is some stress in the system but they appear to know the risk and parts of business they want to get in.

Their lending book growth remains healthy, net interest margins pressure remain relatively benign despite the heavy hikes in interest rates over the last 18-24 months. So even within sectors, there are positive areas.

There are no particular sectors that we are overweight or underweight on as it depends sectoral dynamics. It is all driven from company specific issues and attractions that we see.

Q: What about the public sector banks, which have got hammered over the last one month. Do you find value there at this point?

A: We are looking at the few names that could be interesting but the PSU banks have been always relatively cheaper, than the private sector banks. So that value differential has always been there. They do have more conservative balance sheets and more plain traditional approach to banking, which is nice and stable.

However, it means that at times they weren't much commercial and were a little bit late in executing policies and credit control. So, there is some attraction in that space but I wouldn't take names at this stage.

Q: The space that you have held and liked for a long time is technology and that has just got pasted this last month. How have you approached the tech space and are you still holding your core positions there?

A: There are very good, world class companies in the Indian telecom sector. They have accumulated very strong bench of engineers that are transportable, transferable to almost any other market in the world and I don't think they are particularly expensive either from a PE perspective or as comparison to what they offer to their customers globally. There will probably be a slowdown in consumption, but it is difficult to say, that there would be large negative impact on these companies.

They are very efficient, cost effective and they provide good value to their customers. So even when their customers are stressed, they may not necessarily pullback on the IT services that they buy or commute to from Indian suppliers. Other than Infosys and TCS , we have a couple of small and mid-cap names that are interesting. CMC and Mphasis have got good segments of customer base; we find them attractive and they are even cheaper than expected.

Q: Auto sector has seen some disparate buying interest and there is a preference right now for two wheelers and tractor makers. How would you approach that sector?

A: There are quite a few attractive companies in the two-wheeler and four-wheeler space but it's really the levels of competition that make it very important to be selective about stocks you like. We visit Bajaj and Tata Motors quite regularly but our stall is to pick one as much as possible and not to hedge our bets. So for various more conservative purposes, we have picked Hero MotorCorp .

We hold Bosch , the only other listed Bosch subsidiary in the world. We like what they supply, we like how they feed into development and increase sophistication of four wheelers and two wheelers to market in India. However, it's not particularly a cheap stock. So, you need to be very selective about your time frame and what you are looking for.

Q: Anything from the FMCG space you have owned because that is one sector which has worked out over the last six to nine months?

A: We have been topping in segments on selected names but the FMCG segment is not particularly cheap. If you want a short-term gain, it is difficult find value there.

You need to have a longer-term time frame and if the company grows its earnings base, it will grow with the market share. If you have that perspective in mind, I would be comfortable in recommending stocks like Nestle , Godrej , HUL , ITC ; these are good companies run with long-term shareholder in mind and they have got very good track records in execution.

Q: There has been some disconcert with lack of policy progress we have seen ever since the election results.  Have you been disappointed to that regard as a large investor into India?

A: Most observers would say, given the existence of strengths by the existing government, more progress can be achieved. However, it's not very simple with the scandals that we have had and with the protest going on; it's delicate balance to maintain.

Fortunately for us, I don't have to make decisions based on government policy and regulation or policy making. We just pick the best companies operating in each of the environments and when it comes down to stock picks it's been an easy decision for us.

The Indian government could have done more on the reform front but if you ask me that answer would be the same for any other government in any other emerging market.


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