Aug 05, 2013, 02.47 PM IST | Source: CNBC-TV18

Bet on exporters; avoid economy related stocks: BP Singh

Domestic investor will continue to remain cautious and in that context, companies that are focused on the domestic businesses will continue to disappoint whereas the companies which are exposed to exports will continue to do well

BP Singh

ED & CIO, Pramerica MF

More about the Expert...

Huge capital account deficit (CAD), weakening rupee and a cautious pack of domestic investors have left very little scope for domestic stocks to resurrect, says BP Singh, Executive Director and CIO - Equity, Pramerica Mutual Fund. Amid this despair, export-oriented stocks are expected to provide some relief.  The domestic macro situation continues to deteriorate for want of meaningful investments. Unless the situation improves, entrepreneurs are unlikely to return, feels Singh.

Also Read: Global cues favourable for EMs; Nifty may pullback: Udayan

Singh told CNBC-TV18, Nifty’s earnings are not representative of the market because Nifty is dominated a lot by the export oriented entities. The earning disappointment in the broader market is much more vigorous. However, Nifty earnings are expected to improve due to the rupee fall, he added.

Below is the verbatim transcript of BP Singh’s interview on CNBC-TV18

Q: How is it looking for you looking at the macro and the earnings backdrop? Is it possible that the market seeks lower levels in the months to come?

A: Market could probably marginally go down. However, one will have to divide the market into two parts. You will see that there will be continuous inflow of money into the market, particularly from overseas investors. Though the domestic investor continues to remain cautious and in that context you will see that the companies that are very focused on the domestic businesses will continue to disappoint whereas the companies which are exposed to the exports will continue to do well. However, there will be marginal pullback here and there considering the valuations. Overall the drift down will carry on for particularly the old economy stocks.

Q: What about the earning season, what have you made of earning season so far and what could the earnings growth look like given the slowdown that we have seen in FY14?

A: If you look at the Nifty earning, at this point in time it is not truly representing the entire market because the Nifty is dominated a lot by the export oriented entities. Entities, which are getting benefit because of the currency depreciation that is taking place.

But if you go to the broader market, you will find that the earning disappointment in the broader market is much more vigorous and that is why you noticed that there is more selling on the outside Nifty or when you get into the much more broader indices.

If I focus only on the Nifty then you will notice that the earning improvement has taken place because of the rupee depreciation. If we have a view that the rupee continues to depreciate, which we believe that the rupee probably will weaken then in that context, we find that the earnings for the Nifty will continue to improve. However, we would like to point out that is not true representative of the entire market.

Q: Given the kind of cues that we have both macro and micro, do you think this market is headed back towards those yearly lows of around 5,500 or so or do you think that this range that we are currently drifting in will continue?

A: To look at the market, we will have to divide into two parts. One is the global and other is the local. If you see the last one and a half years, the Indian markets have been driven mainly by foreign inflows.

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