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Lalit Nambiar of UTI Mutual Fund is more bullish on Indian equities than gold (in rupee terms).
moneycontrol.com The World Gold Council (WGC) expects demand for gold in India to rebound after falling nearly 20-25 percent in 2012 to 750-800 tonne. However, Lalit Nambiar, senior vice president and fund manager (equities), head research, UTI Mutual Fund is more bullish on Indian equities than gold (in rupee terms).
"WGC is talking in dollar terms and this need not translate into benefits for Indian investors. If the rupee appreciates versus the dollar, then the rupee gains in gold will be lower than the dollar gains," he told moneycontrol in an interview.
Sharing insights on Indian equities, he said, given the domestic macros and global cues markets are likely to remain volatile, but the long term trend remains bullish, so one should be prepared for 8-10% short term corrections within longer rallies.
As far as sector bets, Nambiar is putting his chips on banking and energy. He expects the pharmaceutical sector to clock strong revenue growth, but being a defensive play, it is likely to under perform the market.
Below is Lalit Nambiar’s interview with moneycontrol.com
Q: World Gold Council expects global gold demand to rebound in 2013 and continue its bull run. What does that mean for equities?
A: In INR terms, I am more bullish on Indian equities than on gold. WGC is talking in USD terms and this need not translate into benefits for Indian investors if the rupee appreciates versus the USD.
To elaborate, with currency printing by most major economies, all assets will be reflated, but some will return more than others based on how the investor's home currency moves. If globally gold appreciates versus the dollar, one would say USD gold price is up, but at the same time, if the rupee also appreciates versus the dollar than the rupee gains in gold will be lower than the dollar gains.
Q: There is a proposal to allow gold ETFs to earn interest on physical gold under a deposit scheme. Do you see any major benefit from this move?
A: ETFs are miniscule in the context of India's overall imports of gold. Indians imported gold worth USD 61.5 billion (or around Rs 341,000 crore) in 2011-12, while the size of assets held through gold exchange traded funds (ETFs) were only about Rs 11,198 crore (Sep-12). Theoretically, the move will reduce gold imports to some extent and improve India's current account deficit, but it will be small change.
Q: UTI Lifestyle fund has highest exposure to financial services sector; what do you see as the key triggers for this segment?
A: Rate cuts and turnaround in the economy would be the key triggers going ahead.
Q: What is your assessment of the earnings season so far?
A: It has been an average one except for the IT sector and Reliance.
Q: How do you see the pharmaceutical sector faring this year?
A: Revenue growth will be strong, but being a defensive it may just perform below market.
Q: The cash component for most of your funds is between 5-9%. Do you see a big correction in the market anytime soon?
A: Markets are in a very volatile zone given the extent of macro drivers and the large flows of money worldwide, so 8-10% short term corrections within longer rallies are par for the course.
Q: Which are some of the sectors and themes that you find attractive in the market at present?
A: We still like Banking and energy is another area we find interesting
Q: What would be your advice to equity investors at this stage?
A: Equity is a really long term game, unfortunately public memories are short, so many people are exiting equities now because they are seeing a chance to get out without a loss after five years of poor performance.
But this is a mistake in my view as our internal studies show that if one stay invested in Indian equities for at least half a generation viz. 15 years one is highly likely to create real wealth and generate real returns. Also we must remember equity is the only way most non-entrepreneurs can participate and share in the upside from wealth created by businesses.
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