Religare MF bets on local consumption trends,-ve on telecom

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Mkts trading at 18 times FY10 earnings: Kotak Inst Eq Don't see major moves in mkts today Nifty BSE | NSE 30/05/12 Are Mutual Funds betting on Nifty?

Q: How would you position your portfolio now? On one hand you have got valuation concerns with much of the largcap space and on the other markets are moving up. So, you cannot be 100% in cash. Where do you strike a balance between high beta and defensive plays?

A: One should focus on those spaces where one has the highest confidence about. The thing that we can really feel the highest confidence about is the entire domestic consumption story. Clearly, the kind of bounceback that we have seen in domestic consumption at the consumer end or for that matter in terms of industrial production has been far better than anybody anticipated.

Our focus at this point of time is to go back to where we think there is the strongest underlying secular story in terms of trends and that is really the entire domestic consumption basket. There is no doubt that even in those areas valuations are not all that appealing. But if I have to chose between where I see a secular wind behind my back and where I see issues which is largely in areas which are more globally correlated, whether it be minerals, metals, mining, energy, refining all these areas have more globally driven correlations than the domestic pack. Even if valuations are challenging, our preference is to sort of stay overweighted more in the domestic consumption trends where the secular wind behind our backs can offset the valuation risk that market itself poses.

Q: Give us a market range for next Diwali?

A: The thing with market range over the last one year has been so extreme. If anybody told you a year ago that the market might be up close to 100%, you most probably might have laughed him at the face. I am not really going to try and predict that, but the challenge over the next 12 months is going to continue to be highly volatilite. The economic trends that you see in itself is extremely high. Twelve months ago we were starring at deflation, now we are starring at inflation. Twelve months ago the rupee was collapsing, now suddenly it was appreciating. So, these kind of dramatic movements and underlying economic variables are making the whole forecasting business look down right silly.