Daily Voice | Harish Krishnan of Kotak AMC overweight on 4 themes for portfolio allocation

Q: You think RBI would hint at a rate hike in its December policy meeting given the rising expectations of a rate hike in the US?

Central banks have multiple tools – rates, liquidity and other parameters nudging banks to lend, etc. While central banks across the world last year were unanimous in their support to both liquidity and lower interest rates, over the last 6-9 months, the global central banks are diverging in their policy responses on liquidity and rates.

RBI also has been draining liquidity in past few policy meetings, and while inflation has been strong in the recent month, globally and India, we think RBI may want to continue to support the growth objective of the economy.

Q: What is your broad expectations for Q2FY22 GDP, scheduled to be announced at the end of the current month?

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Recent high frequency indicators (fuel consumption, power, GST, mobility data), etc. are all suggestive of strong normalisation of economy, bouncing from pre-Covid levels. While private consumption indicators are strong, government consumption expenditure tends to be volatile and that may have a bearing on headline GDP levels. Notwithstanding headline print, we think overall economy is trending well.

Q: What are the challenges for Indian equities? As a result do you expect consolidation to continue in the next six months?

Corporate India earnings are shaping well and we sense a medium-term recovery of earnings cycle and investment cycle as balance sheets of India Inc. are in a good shape in post-covid environment. While fundamentals are encouraging, we have seen strong equity performance in last 18 months.

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Given this, valuations are rich, both in absolute terms as well as relative to other emerging markets. Along with this, IPO/QIP have brought in significant supply, which the markets will take time to digest. Besides this, events like state elections, interest rate trajectories globally, growth impulse slowing down from China may also impact markets in near-term.

Q: What are the key themes that one should consider for a portfolio now with one year view (by 2022)?

We have longer-term orientation in our portfolio construct. With this caveat, we are overweight on the following themes:

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a) Financialisation of savings – we think top 10-15 percent savings pool has improved and this will be channelized to various products like insurance, card, gold, property, etc.

b) Investment cycle turning – private capex and real estate are turning, and we believe industrials, B2B consumables like gas, telecom, auto ancillaries, etc. are getting funds

c) Revenge consumption – with services opening up, we think consumers will spend on various categories like retailing, eating out, travel, etc.

d) Global value chains – global corporate and consumers are in better shape post covid. With global demand being good, many companies look to change businesses using digital transformation, INR has depreciated by 15-17 percent against various Asian peers like Chinese Yuan etc (pre-Covid to now) as well as PLI (production-linked incentive) etc, we think companies catering to global chains are likely to do well.

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