Himadri Buch Moneycontrol News
DHFL Pramerica Mutual Fund has zeroed in on stocks from the infrastructure and agriculture sectors to drive its growth. The mutual fund is bullish on these sectors given the government's expenditure towards them.
The fund house's Executive Director and Chief Investment Officer EA Sundaram said that another theme that would play out over the next several years will be the emphasis given on sources of cleaner energy.
In spite of a volatile market, DHFL Pramerica Mutual Fund has been witnessing inflows in its large cap fund, balanced fund and equity-linked savings scheme. The mutual fund is sitting on minimum cash levels of 1.3 percent in their equity schemes.
In an interview with Moneycontrol, Sundaram said that in the shorter term, the market is driven by sentiment, and a strong tariff measure by the Trump government is likely to impact sentiment negatively.
Excerpts:
Q) The Nifty has fallen by about 10 percent from its all-time high of 11,171. Do you think the pain is likely to continue on D-Street amid global and domestic headwinds?
A. Yes, the Nifty has corrected about 10.5 percent from its peak. As to the prediction about whether the “pain” is likely to continue, investors are well-advised to focus on the following things that are far more important: (a) what sort of companies are we buying? (b) at what prices are we buying them?
These are the two things that would support the investor in the long run. If the funds are invested in strong businesses that are capable of competing effectively, and are capable of sustainably growing their businesses, and if such shares are purchased at prices that are not exorbitantly expensive, the investor has a better chance of succeeding.
Q) Do you think protectionist measures initiated by the Trump government will impact Indian markets? If yes, which are the sectors that are likely to face the headwinds and why?
A. In terms of the sentiment caused by such protectionist measures, certainly the market can be impacted. In the shorter term the market is driven by sentiment, and a strong tariff measure between major economies is likely to impact the sentiment negatively, for the short term at least.
Q) FY18 belonged to the bulls, but what is your outlook for FY19?
A. On an index level, the Nifty is quoting at a TTM (trailing twelve months) PE of about 25-26 times, as against the long term average of 18-19 times. The midcap index is more expensive at about 45 times (TTM). However, in any market, there are individual stocks that are quoting lower than average, and it is the endeavour of the investor to identify such opportunities.
Q) Any particular sector(s) that is likely to hog the limelight in FY19?
A. The market usually throws up new favourites. The current favourites such as private sector banks, NBFCs, HFCs and mid-caps have had their time under the sun. The new favourites would possibly be from amongst the less popular ones of today.
Q) After this recent correction, do you think inflows into MFs which picked up the pace in 2017 could now taper off or see some redemptions?
A. It is a cycle. There could be ups and downs in the MF inflows, especially in equity, but let us not forget the long-term trends. In India, financial savings are growing as proportion of total savings, and within that, equity and equity-related MFs are a smaller proportion compared to world averages. We are confident that over the longer term, equity investments for the Indian population would rise significantly from these levels.
Q) Do you think there could be more skeletons that could come out of the banking sector's closet, especially after the Nirav Modi-PNB saga? It looks like woes for the banking sector are here to stay and if they spread to the private banks too, it could be disastrous. Do you agree?
A. Scams and scandals in the banking system are not unique to India, or to Indian public sector banks. Yes, it was unfortunate that in the last 3 years, the PSU banks in India have been affected by various negative news one after the other. Our job is to identify good business models at reasonable valuations in different sectors.
At this stage, we do not wish to speculate if this would spread towards the private banking space. We would continue to have a careful look at the companies we choose to invest in, irrespective of whether it belongs to the private or public sector.
Q) Any top five sectors which are looking attractive?
A. As a company, we are bullish on consumer spending themes, and also on the improvement of India’s infrastructure as a theme. We are also betting on the theme of India’s agricultural productivity rising over the next few years. Another theme that would play out over the next several years is the emphasis given on cleaner energy sources.
Q) FIIs seems to be bailing out from Indian markets, do you think the trend could continue in FY19 as well?
A. Rather than focus solely on FII inflows, we should focus on whether this country and its stock market offer scope for growth, and whether there are opportunities to invest at reasonable prices. If these are to be found in India, the FIIs would continue to invest. Let us not forget that there are very few economies in the world that offer the kind of growth prospects that this economy has to offer. So, as long as the valuations are reasonable, the FIIs cannot continue to stay away from India.
Q) What kind of schemes are seeing the highest inflows?
We are seeing decent inflows in our large cap fund, our balanced fund and the ELSS fund.
Q) Do you feel there could be a shift from equity to debt because of volatile markets?
A. In the short term, there would always be cycles of optimism and pessimism that would affect shorter-term flows. We have to see the structural shift of financial savings increasing, and of equity and related investments increasing in proportion, over a period of time. We believe that this shift is structural, and would play out over the next few decades.
Q) What are the cash levels in your schemes?
A. In our open-ended schemes, we do not take a cash call. Our cash levels are usually between 1-3 percent of the AUM.
Q) What is your advice to investors at this point in time?
A. Don’t bother about maximizing returns, stick to a discipline of SIP investing but be aware of what you are investing for. Have a mix of different kinds of funds but not too many of them. Having a mix of good products is much better than trying to invest in the best product.
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