Daily Voice | Union AMC chief bullish on consumer discretionary, sees favourable risk-reward in financials

G Pradeepkumar is the CEO at Union Asset Management Company

Consumer discretionary steals the focus among sectors, G Pradeepkumar, chief executive officer of Union Asset Management Company, says in an interview to Moneycontrol.

The demand for discretionary goods is particularly noteworthy in T2/T3 cities and beyond and is further fuelled by a surge in interest in innovative products and services, he believes.

Pradeepkumar, backed by more than 30 years of experience in the mutual fund industry, says proactive regulation by the Reserve Bank of India, coupled with attractive valuations, contributes to a favourable risk-reward profile in financial sector. Excerpts from the interview:

Are you adding exposure to consumer discretionary space?

As the per capita income in India has crossed the threshold of $2,200, our analysis of the consumer discretionary sector indicates a robust demand driven by a trend of "newness". The demand for discretionary goods is particularly noteworthy in T2/T3 cities and beyond and is further fuelled by a surge in interest in innovative products and services. Therefore, we hold a positive outlook on the consumer discretionary sector.

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G Pradeepkumar

CEO|Union Mutual Fund

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Do you expect the market to stay on the higher side till the Union Budget?

While the positive outcomes in the state elections have contributed to an optimistic market sentiment, it's essential to acknowledge that market dynamics are multifaceted.

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While the Union Budget is a pivotal event, short-term predictions remain challenging. Our approach as a fund house is to stay committed to informed investment decisions for long-term value creation.

Do you think the domestic money flow is the major reason behind the market rally?

In our opinion, while domestic money flow is certainly a key element, the market's upward trajectory is driven fundamentally by India's anticipated robust economic growth and substantial investments in infrastructure. This positive outlook has also attracted foreign investors seeking opportunities.

The market's resilience and upward momentum can be attributed to the economy's and capital markets' inherent fundamental prospects. Notably, the strength of domestic flows, mainly through Systematic Investment Plans (SIPs) in mutual funds, has been a significant contributor to market resilience.

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Will there be any revision in economic growth estimates by the RBI for FY24 in its December policy meeting?

Considering the robust GDP growth observed in the July to September quarter, a positive adjustment to the annual GDP growth estimates by the Reserve Bank of India (RBI) in its December policy meeting won’t be surprising.

Do you think the US growth slowdown is likely in next calendar year, but may not be as severe as expected earlier, considering the current economic data?

We believe that the economic indicators coming from the US are positive. While a mild slowdown cannot be ruled out, we are not anticipating any severe slowdown or recession in the US.

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Most experts are divided on an expected cut in Fed funds rate, some are saying in first quarter of 2024, and few are saying in second half of 2024. What is your take?

We believe the first quarter of 2024 would be too early to expect a rate cut. Inflation is still a concern and above the targeted rate in the US. The Fed will only consider rate cuts once they are confident that inflation has been brought under control.

We would expect at this stage moderate rut cuts in the second half of 2024.

Which are your top themes to bet on for 2024?

Our focus centres on a bullish stance on consumer discretionary. We find potential in large-cap stocks due to their attractive valuations despite recent stock performance lag.

Recognising signs of a capital expenditure cycle among Indian corporates, we see opportunities in the industrial sector, particularly in manufacturing. However, a prudent, selective approach is recommended due to optimistic pricing in certain pockets.

Aligning with growth in the industrial, manufacturing, and consumer sectors, we view the financial sector favourably. Proactive regulation by the Reserve Bank of India, coupled with attractive valuations, contributes to a favourable risk-reward profile in this sector.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.