Ambit Asset Management CEO Sushant Bhansali thinks that the Indian market, which has been scaling new highs, shrugging off weak global cues, has already priced in rate hikes by the Reserve Bank of India and the US Federal Reserve.
Bhansali, who has more than 19 years of experience of asset management and capital markets, expects the Reserve Bank of India to go for a smaller hike of 25-30 basis points when it meets next week as inflation cools off.
A chartered accountant by training who also has an MBA from Hyderabad’s Indian School of Business, Bhansali tells Moneycontrol in an interview that value is emerging in software, pharma and select discretionary names. Edited excerpts:
Are you convinced that the dollar has peaked?
USD has been strong this year against major currencies, courtesy aggressive monetary stance adopted by the Federal Reserve to combat multi-year inflation. We believe that given the growth moderation across the globe, coupled with falling commodity prices and inflation softening, we may see peaking US interest rates in the next six months.
Other factors such as Europe's recession, change in Japan's central bank policy, and China's zero covid policy stance will have a bearing on USD performance.
What are your expectations from the monetary policy committee's December policy meeting?
The RBI has already raised rates by 190 bps cumulatively YTD to 5.90 percent to combat inflation. Inflation eased to 6.7 percent at a three-month low in October.
We believe RBI will resort to small hikes at 25-30bps with moderating inflation and the recent fall in crude oil prices will also help the economy.
Do you think the market has priced in the expected terminal rates of the RBI and the US Federal Reserve?
India and the US 10-year bond yields have cooled off after recent inflation prints and economic outlook. We believe the expected terminal rate of both markets is priced-in given that subsequent hikes will be lower.
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Which are the sectors that you are adding positions to or want to add positions soon?
We are strong believers in investing in companies that have strong earnings growth visibility over the medium to long term. We are keenly evaluating sectors such as software, pharma and select discretionary where value is emerging.
Have you started betting on IT names or do you want to wait for some more time? Also, do you think attrition is not a big concern now?
Q3 is usually the leanest quarter for the sector along with furloughs in the US. The slowdown in growth has been a concern for the sector and post-correction, valuations stand at a marginal premium to long-term averages. We are selectively getting constructive on this sector.
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What is your take on oil market companies (retailers), given the fall in oil prices?
Given our large import dependence, any fall in crude oil brings cheer to the economy as well as markets. Oil marketing companies (OMCs) should benefit, as marketing margins should expand going forward.
Until last month, OMCs were losing Rs 8-9 per litre of diesel versus break even at current levels.
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