Moneycontrol
Last Updated : Sep 26, 2018 01:48 PM IST | Source: Moneycontrol.com

Economy on mend, but oil at $85-90 could be party spoiler: Mihir Vora

FIIs have been net sellers with more than Rs 5,000 crore worth outflows so far in September

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Even as NBFC stocks have been falling sharply in trade for the last few days, some experts are maintaining their long-term view for the companies.

"The correction in non-banking finance companies (NBFCs) is just a culmination of events like ratings downgrade and lost of trust, otherwise fundamentally we are positive on NBFC space due to their spread, and each is in its own niche segment which helping them to sustain margin," Mihir Vora, Director and CIO, Max Life Insurance told CNBC-TV18.

So he feels margin is not a problem, pricing power is not a problem and raising of funds is not an issue for NBFCs but it is more of a trust deficit kind of issue.

The Max Life Insurance is positive on the space but in rating terms, it is underweight due to expensive valuations. This correction is the right time to look at the space, he feels.

The Sensex has lost around 2,600 points since August 28. The backdrop for the market is turning weak and the biggest factor is oil which is trading above $80 a barrel, he said. To make things worse, FIIs are withdrawing funds from Indian markets.

He further said there is a general sense of cautiousness in the market about mutual fund flow. "Numbers are still positive but positive numbers are reducing."

FIIs have been net sellers with more than Rs 5,000 crore worth outflows so far in September while mutual funds bought same amount of shares in the current month.

Will market break 10,500 levels? Vora said the level is not very far in percentage term as it is just 5 percent odd correction from current levels, which is not extraordinary.

Consumption

He said consumption is definitely a theme right now as India is in pre-election year and he doesn't think the government will cut down on expenditure. "Rural economy will also get a tailwind from monsoon so consumption is a good factor to play."

Infrastructure, Housing

There has been increasing contracts from government for boosting housing, urban infra, EPC projects etc. So we expect good orderflow to continue and the sector as a whole should continue to do well, he feels.

Financials and Exporters

Vora feels if crude oil prices go up further from hereon then we will turn underweight on financials and overweight on exporters where we have been overweight which could extend.

Brent crude futures, the international benchmark for oil prices, were trading around $82 a barrel, the highest level since November 2014. It gained 28 percent year-to-date and more than 45 percent in last one year.

India is the net oil importer as it imports more than 80 percent of oil requirement which constitutes major part of import bill.

Elections

Vora said fundamentally the economy has been showing good uptick, but if oil goes to $85-90 a barrel levels then it could be party spoiler and all bets would go off.

But if crude stays around $70-75 then Indian economy which has gathered momentum will continue, he added.

Defence

In the defence space, there is a painful long waiting period for orders and execution. We did have exposure to the sector but due to long waiting period we don't have exposure to the sector, he said.
First Published on Sep 26, 2018 10:55 am
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