Axis AMC bets on consumption, banking and IT

According to him, the portfolio should be stewed towards consumption, banking and finance and to a certain degree to IT. "We continue to be relatively underweight on the infrastructure and capital goods space," he adds.

Also read: Don't expect major selling in June, says Samir Arora

Below is the edited transcript of his interview with CNBC-TV18's Gautam Broker and Ekta Batra. Also watch the accompanying video.

Q: What you have made of the Q4 GDP numbers and the correlation with regards to the markets? Do you think that the reaction seems like the markets were factoring in a poor data?

A: If you look at company results, if you see all the pain and suffering that we have seen on the current account deficit and the depreciation of the rupee, I think the market were broadly of the view that growth numbers would be weak. But clearly the fact that we have got a 5.3% print is in that sense a surprise. But I think the expectations were that the numbers would be somewhere in the vicinity of 6%. So, expectations were fairly low, but we got a number lower than that.

Q: Could the market draw some hope from the fact that because the growth is been much below trend growth, this builds up the case for some kind of easing by the RBI? Do you think it is possible that a shocker like this could induce some action from the central banker or those hopes still remain low given the inflation?

A: Given the fact that manufacturing is now growing at probably in a vicinity of about 2%, I think it is fair to assume that pricing power and inflation in that sense will ease going forward. Two, not withstanding the depreciation on the rupee, we have seen significant weakness in global commodities including oil. So, in that context, I think inflationary expectations should begin to ease as we go forward.

Inflation is beginning to come off not necessarily in the next couple of months because the base effect, will push inflation up by about 100 basis point over the next two-three months, I think the trajectory on inflation should also be lower. So, it is fair to assume that we will get a cut off in policy rates of about 50 basis points over the next 12 months.

Q: In light of the current situation then what would you recommend to investors? Would you recommend investors to actually start building quality portfolio at this point in time on lucrative valuations?

A: We have been mentioning to our investors over the last month or so that look beyond the headlines. We are seeing value in numerous stocks across sectors. I think if you are a long-term investor, it certainly makes sense for you to start buying into this market at this point in time.

Equity as an asset class is hugely under owned at this point in time, given the fact that Indian retail investors have not actually bought either through the insurance route or through the mutual fund route over the last couple of years. So, whether you look at it from a fundamental perspective or you look at from a behavioral perspective, I think these are good levels to start building a quality portfolio.

Q: Where exactly do you think valuations look ripe at this point in time? Which sectors would you possibly be completely underweight on?

A: I think we continue to believe that the portfolio should be stewed towards consumption, banking and finance and to a certain degree to IT. We continue to be relatively underweight on the infrastructure and capital goods space.

Q: What do you look forward to? Growth is slipping off; you know that there is a lot of European uncertainty and that could lead to a negative spiral in the markets here. What would be the rational behind buying at this point and not waiting for some more time?

A: I don’t think we are seeing that you need to put your entire Rs 100 into the market at this point in time. If you are really looking to invest Rs 100, start to nibble at this market from here onwards. It’s very difficult to sort of figure out whether the markets have bottomed or no and how long that bottoming process is going to be. But it makes sense for you to start nibbling in this market at this point in time.