Building materials, FMCG, agri-related, select capital goods, niche pharma companies and companies involved in productivity improvement, automation should be part of portfolios, said Devang Mehta, Head of Equity Advisory at Centrum Wealth Management in an interview with Moneycontrol's Sunil Shankar Matkar.
Edited excerpts:
Q: FII flows have been very strong from February. Do you expect the inflows to continue in the rest of 2019?
A: After a couple of years of staying in hibernation, FIIs seem to be in a mood to allocate capital towards Indian equities.
Central banks across the globe have been adopting a softer stance, and with low inflation and declining interest rate scenario in India, coupled with an expected earnings recovery, there is a decent probability that Indian equities receive reasonable foreign money allocations.
Q: Considering more than 900 points rally on the Nifty from February 19, will the market surpass its all-time high and is it the right time to buy stocks?
A: Crossing the all-time high is just some distance away and will be more sentimental in nature. The most important part is to see, whether the rally is broad-based or polarised towards few sectors and stocks.
It is heartening to see a number of good quality businesses, from across the market cap spectrum, start to participate in the rally of the last couple of weeks. We have been advocating to buy great and good businesses at reasonable valuations.
Q: Assuming it is a pre-election rally, if the current ruling party fails to get a majority to form the government, will you change your market view?
A: Long term trajectory of the market and good businesses do not depend on short-term repercussions and volatile moves due to elections. In longer durations, the market is a slave of earnings.
In the current context, the market participants are sensing the possibility of the incumbent government retaining power, which provides policy stability. However, in the shorter term, the market can react positively or negatively depending upon the expectations that are built in before the election results.
Q: What is the key theme to play this year in light of general elections?
A: We believe in themes that last for at least three to five years. There is a distinct shift happening from physical assets to financial assets in India in the last few years. The beneficiaries here are private banks, certain NBFCs, insurance companies, asset management companies, etc.
Building materials, FMCG, agri-related, select capital goods, niche pharma companies and companies involved in productivity improvement, automation should be part of portfolios.
The idea is to ignore the short-term noise and pick robust businesses with earnings visibility.
Q: Do you expect private and public investments to increase in the near future?
A: The government capex played its part in the last few years where infrastructure, roads, airways, ports and a host of other infra related development transpired.
There seem to be certain indicators that probably pinpoint towards the return of private capex in the second half of this year, as capacity utilisation rises. Also, the corporate balance sheets have considerably deleveraged in the past couple of years.
Q: IT sector was a market leader in 2018. Do you expect this to continue in 2019?
A: With a depreciating rupee and people willing to be more defensive in 2018, IT turned out to be a leader. There is a likelihood of more localised or domestic themes leading the market in 2019.
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