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Last Updated : Apr 10, 2018 01:23 PM IST | Source: Moneycontrol.com

Trend in global interest rates, political uncertainty among key risks; Here are S Naren's sectoral bets

Speaking on redemption pressure seen in mutual fund inflows for March, Naren believes the month, historically, does not give much clarity.

The market on Tuesday cheered handover of positive global cues, backed by Chinese President Xi Jinping’s comments on ‘opening up’ of its economy. The Sensex began over 100 points higher, while the Nifty trading well above 10,400 mark.

A key risk of global trade war concerns may have ebbed with this development, experts believe, but one has to be cautious about the interest rate scenario.

“In the global economies, growth is seen picking up. I thought the real issue could be due to much higher interest rate scenario,” S Naren, ED & CIO, ICICI Prudential AMC told CNBC-TV18 in an interview. This situation could take place over the next 12-18 months, he said.

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Speaking on redemption pressure seen in mutual fund inflows for March, Naren believes the month, historically, does not give much clarity. “It is the last month of financial year, books of accounts are being closed, people are investing in tax-saving schemes or paying advance taxes, among others,” he said. So, there is not much importance to be given to this data. Having said that, the slowing down of flows is also coming from a high base, he highlighted. In fact, on a YoY basis, these flows are comfortable, he said.

Among key risks for the market, Naren cites political uncertainty along with global interest rates as a couple of them. They could keep the market volatile for 12-18 months.

“We also have to see that we are coming of a situation where mid and smallcaps are costly. So, the prospects up to medium term may not be very high. If investors are willing to put money for 5-10 years, the market overall will give you many opportunities,” he told the channel.

Naren also gave his views on a few sectors, including IT.

Consumption

He said that the period prior to elections is seen as a good time to play consumption theme. Having said that, a few scrips are not cheap in this segment. So, one must choose the ones with a good outlook over the next two years and at the right valuations, he said.

Power

He reiterated his stance that utilities was one of the biggest overweight among all sectors. The outlook for the sector is good and a shift in market share among power companies is seen. He also spoke about how renewable sector was growing, but is still not giving power to all parts of the country.

Information Technology

Naren believes this is a sector which could perform well at a time when the market is not giving big returns. It is not a sector which will do well when the market will give 20 percent returns. He pointed to how the sector had been an underperformer all through the bull run in 2017, but started performing better when the market started falling in the past few months.

Financials

He is not willing to bet on NBFCs right now as the interest rates have hardened, which in turn push up costs for these institutions. Naren rather places his bets on non-NBFCs. He suggests looking at insurance for a long term play.

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First Published on Apr 10, 2018 01:20 pm
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