MS Invst Mgmt's sector outlook for next 12-18 months

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MS Invst Mgmt's sector outlook for next 12-18 months

With global uncertainties getting resolved earlier than expected, the markets are likely to give good returns in the next 12-18 months, says Jayesh Gandhi, Executive Director, Morgan Stanley Investment Management.

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The Budget has been able to give quite a fillip to the markets that saw yet another strong session yesterday (March 3).

With global uncertainties getting resolved earlier than expected, the markets are likely to give good returns in the next 12-18 months, says Jayesh Gandhi, Executive Director, Morgan Stanley Investment Management.

Believing that 2010 will be a tough year for the auto sector, he is still looking at auto ancillary stocks to invest in.

Being positive on ITC despite the excise duty hike, Gandhi says, he also likes private sector banks in the financial space as well as the pharma sector.

Below is the edited transcript of Jayesh Gandhi's exclusive interview on CNBC-TV18. Also watch the video.

Q: Does it seem like the market has broken out of that range it was shackled in for so many months after the Budget?

A: Difficult for me to give you a shorter term directional view. We could very well see the market consolidating. Earlier, at the start of the quarter, our view was that first half or more particularly first quarter of 2010 would be more difficult. That is playing out-whether we will break the range that you talked about very difficult for me to say. But one comment that we made to our investors and distributors post the Budget was that if one were to take a 12-18 month view market could very well give us above average returns over the next 12-18 months and the risk reward ratio is now significantly in favour of the equity investor post the big event, which is the Budget having done or having being tabled.

Most of the global issues are more or less getting discounted or in the price. So market will start re-focusing on the fundamentals, which is the corporate earnings growth. Post Budget, more and more of us are getting more and more confident that earnings are going to come back.

Q: Do you think we will be still trapped in a bit of a trading range or do you think the market could surprise by moving higher than the January highs in the near term over the next month or two?

A: Again, it is very difficult for me to give a month view. We still have some bit of global uncertainty although they are getting resolved much quicker than most people expected say two months ago. But to give you a directional view in the near term is really very difficult but I can say with confidence that over next 12-18 months there is a much stronger possibility.

Q: Let us talk a little bit about how you are approaching the market. I believe you are overweight on consumer related sectors. First for FMCG-what are your thoughts on ITC post the Budget?

A: We still continue to like the stock. Maybe the excise duty increases came a bit more than what was anticipated. But by and large, ITC is pretty well diversified consumer play and we continue to like the story there. The other component of ITC namely the hotel business, the paper business and the FMCG business which was making losses which will turn around this year and those should help ITC to post better numbers and so we like the stock. The valuations are reasonable. On the more broader view of the consumer products, I think what the Budget does is leaves a lot of more money in the hands of the consumers.

So that will definitely boost consumption, more particularly towards discretionary spending. The stables will do well but discretionary spending should also get a good leg up. The likely beneficiaries are the retail stocks or the stocks in the real estate space, autos to some extent, two wheelers particularly should benefit. So these are the areas that we predominately have been overweight on and we still continue to like them.