Mihir Vora, Director And Chief Investment Officer at Max Life Insurance expects a 10-15 percent compounded growth from the market over the next two years. He says the market has delivered a little more than the economy till now. It is high time the economy delivers too.
The only possible headwinds for the market can come from global cues, says Mihir Vora, Director And Chief Investment Officer at Max Life Insurance. Global factors such as the possibility December Federal Reserve hike could cause volatility in the market. He does not see any local negative triggers.
He expects a 10-15 percent compounded growth from the market over the next two years. He says the market has delivered a little more than the economy till now. It is high time the economy delivers, too.
He is positive on the local macros for the next 3-6 months.
He remains bullish on the consumer discretionary space and is underweight on fast moving consumer goods (FMCG), IT sector and the pharma space.
He prefers private sector banks and non-banking financial companies over public sector banks.
Below is the transcript of Mihir Vora’s interview to Sonia Shenoy and Latha Venkatesh on CNBC-TV18.
Latha: What is the sense you are getting about the financial space itself? Vishwavir’s of course, is a bank that would not have spoiled its balance sheet, but will you start buying the corporate facing banks now?
A: As far as banking is concerned, our stance has remained in favour of the private sector, not only private sector banks, but even non-banking financial companies (NBFC) for that matter. The broad idea being that public sector banks just do not have the capability to grow and they are still 60-70 percent of the total credit book and if India has to grow at 7 percent or 6.5 percent in terms of gross domestic product (GDP), where is the credit growth going to come from? It has to be met from the private sector. So, private sector NBFCs, private sector banks pretty much have an open field to grow.
Sonia: How are you feeling about the markets now? What is the sense you are getting about the texture over the next 3-6 months?
A: In terms of the next 3-6 months, we are positive on the local macro. We had a good monsoon, we had the Seventh Pay Commission disbursements happening. So, as far as the local economy, rural as urban consumption is concerned, it looks like a good story frankly. The only headwinds we might see in terms of volatility is the global factors. For example, we have the Italy referendum coming up, we have the Fed meet coming up in November-December, so those kind of factors will keep the market going up and down in the short-term but those factors are more global macro rather than the local factors. Local looks better than global.
Sonia: So, talking about the local factors a bit more, we are getting more details on what the goods and services tax (GST) final rate could look like and it is a convoluted structure now because there is a four slab GST tax structure, now there is a possibility of an additional cess as well on luxury goods . would that be a deterrent to growth?
A: I hope they keep it simple. From what I understand they have deferred the final decision to the next meeting and I really hope it remains a simple structure because, as it is, in terms of implementation, there are going to be teething problems as one would expect. And if it is backed up by further complications in terms of cess or multiple slabs, then it is going to be a tough one. So, let us hope they keep it simple.
Latha: Actually today, the bunch of numbers we got overnight, all of them have been good. Hindustan Zinc, KPIT Technologies, Tata Coffee, RBL Bank, Quess Corp. Midcaps numbers were much better than expected. When are you seeing the earnings upturn? Will this be that quarter?
A: There are a lot of micro segments which have done very well in the last few quarters and the last few years also. As I said, the private sector financial space is one, autos have done reasonably well consistently in spite of the headwinds that we have seen locally. So, the market as a whole, probably needs to be looked at more in a disaggregate form rather than looking at earnings as a whole. The global cyclicals like metals, energy, oil and gas, they do not command very high price earnings ratio (P/E). So, the fun is when you get earnings growth in the high P/E sectors.
Latha: and therefore, what will you concentrate on in this quarter, in terms of incremental exposures?
A: In terms of incremental exposures, we are not changing much, in the last 3-4 months. We remain positive on the discretionary space. We remain positive on the private sector financial space. We are underweight on fast-moving consumer goods (FMCG), IT, pharmaceuticals and we are mildly overweight – less overweight than before – in the industrials and capital goods space.
Sonia: But coming back to that point you were making about GST. You have been bullish on some sectors like logistics. Is that a space that still offers value?
A: It is very stock specific and unfortunately, most of them are not very liquid. So, even if one wants to make a big play on it, there is not many options frankly speaking. So, we have some exposure there, but we are not looking at adding anything more.
Latha: Leave our viewers with some kind of a Diwali gift. What is your one year forecast for returns from equities or returns from Nifty? If you are comfortable with two years, give us that number, but give us a hope.
A: The market is already quite optimistic and I do expect 10-15 percent compounded growth for the next two years from the market. But there is one statement I would like to make which is that the markets actually have delivered far more than what the economy has. So, it is now time for the economy to deliver.The Great Diwali Discount!
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First Published on Oct 20, 2016 10:17 am