"We remain positive on large-cap financials, with a preference for NBFCs. With private sector capex gradually picking up, we continue to like the Industrials space," Rahul Bhuskute, Chief Investment Officer at Bharti AXA Life Insurance said in an interview with Moneycontrol.
Strong domestic growth also drives their preference for the pharma and healthcare sectors, he added.
On the rate cut cycle, he feels the RBI will maintain the status quo on policy rates in the October meeting. But the central bank may hint at the start of the cutting cycle in October policy, especially as the MPC fears around the surge in food inflation have subsided quite a bit and headline inflation has remained lower, even lower than MPC expectation.
Bhuskute has over 25 years of experience. He started as an investment banker and then moved into asset management.
Your take on the IT space? Do you expect the sector to continue to outperform from here on?
Information technology stocks have definitely rerated higher after the last quarter's results on the back of higher deal ramp-ups and stable margins. Importantly, there has been a growth uptick in the North American BFSI segment, which forms a sizable proportion of the Indian IT services industry. However, the management commentaries were still cautious with a strong overhang of US growth slowing down.
We sense that, over the last 2 years, institutional investors have generally shied away from putting fresh money in the IT sector as there was a tapering down of growth after the post-pandemic run-up and also as margins started to contract given high personnel costs. Further, there were good growth opportunities that were available in the other segments of the market. Post the last quarter earnings, new money has started to come back into the sector, and we believe it will continue as long as there is not a hard landing in the US economy.
Is it the time to increase weightage in consumption and banking basket?
Consumption, in particular the Staples variety, had suffered in the past couple of years, due to persistently high inflation and weak rural incomes, resulting in poor volume growth for the industry. Easing inflation combined with a recovery in the rural sector (better monsoons and farm sowing+ better prices) is now driving healthier volume growth for FMCG companies. We are positive about the Consumption space. While the banking sector remains attractive on valuations, we are cognizant of near-term concerns on growth, the challenges in sourcing of deposits by the industry, as well as potential margin headwinds.
Sectors that you want to focus on for your portfolio?
We remain positive on large-cap financials, with a preference for NBFCs. We also like the Consumer story as well as select Auto names, given the rising momentum in rural consumption. With private sector capex gradually picking up, we continue to like the Industrial space. Strong domestic growth also drives our preference for the Pharma and Healthcare sectors.
Do you see the possibility of a big correction in the equity around US elections?
The US elections are undoubtedly a big event and will get an increasing share of the media attention going forward. However, there does not exist any definite correlation between Indian market performance and US elections. Therefore, we refrain from making any investment decisions based on US election outcomes. We remain focused on making decisions based on what we believe ultimately matters in the long term—buying good-quality companies at reasonable valuations coupled with strong risk management practices built into the portfolio construction process.
Do you see the start of the interest rate cut cycle in September?
In our view, the FOMC should start easing from September but the size of the easing whether 25bps or 50bps remains uncertain post recent buoyant US GDP data. Recently, Federal Reserve Chair Jerome Powell also endorsed an imminent start to interest rate cuts, saying further cooling in the job market would be unwelcome and expressing confidence that inflation is within reach of the US central bank's 2 percent target. We think that the Fed should look at the least two/three unemployment data points before making aggressive rate-cut decisions. We expect the Fed to start the rate cut cycle with shallow cuts of 25bps to 50bps in 2024 against market expectations of 75bps to 100bps and then see how progressively economic data emerges.
In India, the next RBI policy is due in October, we expect that RBI is going to maintain a pause in the October policy and any rate cut may start only from the December policy onwards. We also expect that RBI may give a hint of the start of rate-cutting cycle in the October policy, especially as the MPC fears around the surge in food inflation have subsided quite a bit and headline inflation has remained lower, even lower than MPC expectation.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
