Mar 26, 2013, 10.20 AM IST | Source: CNBC-TV18

Mirae Asset cautious on Indian equities; suggests safe bets

Rahul Chadha of Mirae Asset Global says his fund house continues to remain cautious on the market near term, largely as political uncertainty could aggravate the ongoing slowdown. He is recommending that investors should put their money in defensive stocks in the short term.

Rahul Chadha

Head - Asia Pacific Investment Division

Expertise : Equity - Fundamental

More about the Expert...

Rahul Chadha of Mirae Asset Global says his fund house continues to remain cautious on the market near term, largely as political uncertainty could aggravate the ongoing slowdown. He is recommending that investors should put their money in defensive stocks in the short term.

Also Read: Nifty choppy; first hour of trade crucial: Sukhani

Chadha is bullish on pharmaceutical and IT stocks. He recommends buying cement stocks at lower levels. Chadha says there could be further upsides in oil marketing companies if the government is able to hike diesel prices.

Below is the verbatim transcript of Rahul Chadha's interview on CNBC-TV18

Q: It has been a different start to the year than what one had expected earlier. Have you changed your stance on India? How are you calling it in the near-term?

A: In the near-term, we would be cautious on the market. Our portfolios have been exporter biased, largely in IT companies, pharma companies. We will continue to be positioned that way. There is a perceptible slowdown in the economy that is largely a function of government curtailing its expenditure and the private sector not investing. This will continue for a while because of the election uncertainty, a new variable that has come up in the last couple of weeks.

Q: How would you approach the market at this point? Do you expect to see more by way of losses or do you think people should start making purchases at this level?

A: In the near-term positions should still be defensive. Pharmaceuticals, IT still looks attractive. Outside that, one can look to buy into consumer names and some good private sector banks on dips. One can also add cement stocks on dips. Two-three factors that the market would be watching for would be the current account deficit (CAD) number, which comes in next couple of days. Outside those developments, the political front would also be watched for and continuation of government's steps towards reducing fiscal deficit, doing the much necessary clearances to fast track investment in the economy would be watched by foreign investors.

Q: Is there a risk of further downside because of the political risks that are resurfacing? Talks of Samajwadi Party (SP) and the third front, the Dravida Munnetra Kazhagam (DMK) pulling out, are there fears of early elections or has all of that been priced in?

A: There may be a downside on certain sectors like financials which are well-owned. Should we see elections over next 3-4 months, we can see these sectors correct a bit from present levels.

Q: Now that the Cyprus bailout has been struck, do you think that headwind is finally behind us or because of the news flow that we have seen overnight, will Europe continue to restrict upsides in global equities?

A: This specific headwind is behind, but we have to be mindful of the fact that we have a lot of fragile recoveries happening globally. Each of the big global economies is going through its own set of views. Deleveraging is happening in Europe, US. Japan is going with its own slow growth and again China is trying to re-balance the economy. So every now and then we get these issues in one form or the other. From a portfolio perspective, it should be biased towards good large cap companies with healthy cash flows and stable businesses.

Q: The core problem remains, how poor earnings performance has been. We are going to get into earnings season again in April, what are your expectations?

A: One has reasonably high expectations from the IT sector and that should be on track. Most of these companies have guided to a good demand momentum. Outside that, private sector banks would continue to do well. Select pharma names would do well. The disappointments can come from public sector banks, auto companies and the global cyclicals. So, a lot of this is priced in the market. What moves market up and down from here will be more on the macro economic front for the country.

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