We think all businesses catering to the consumption and investment needs of the farmers are in for a bounty, Lalit Nambiar, Executive Vice President, and Fund Manager, UTI AMC, said in an exclusive interview with Moneycontrol’s Kshitij Anand.
Q) Which sectors are likely to see a ray of light in the New Year?
A) We feel this government is now realigning its policy priorities towards rural India. Going by these new priorities, rather than sectors we prefer to think in terms of businesses that would benefit from these structural tailwinds which will support rural income growth over the next few years.
We think all businesses catering to the consumption and investment needs of the farmers are in for a bounty. This could span a wide spectrum of ideas right from a rural housing finance company, to a rural road or canal construction player, a tractor manufacturer and consumer stories in durables and staples which are closer to rural markets in terms of product mix
Q) It has been a splendid run for markets throughout 2017. What are your expectations for the year 2018? Any big events which could derail the equity rally or market participants will be in a wait and watch mode ahead of general elections?
A) Firstly, there is a chance that the general elections themselves could be called a year early to take advantage of current politico-economic conditions.
A pick up in the credit cycle in India is predicted by the RBI and the rate cycle may actually begin to reverse even as there are incipient signs of inflation.
The US is looking at more than one Fed rate increase in the coming months and this puts some pressure on global liquidity. Investment, therefore, could be more guarded and only themes which are longer term and can subsume the governments’ actions, which will tend towards populism as we near elections, will be able to withstand volatility and outperform markets.
We feel the business cycle could look up in a year or two, although it is much delayed and of course, the rural resurgence coming off the disrupted low base of last year will also bolster it.
Q) The September quarter results were not that bad, in fact, there were more positive surprises than disappointments. Do you think we could see a double-digit growth in FY19?
A) There is a reasonable chance of a lower end double-digit growth in earnings for FY19 given the weak base of FY18. Sales volume growth in most categories are however still at modest levels.
Q) Which sectors are looking attractive or a possible play in 2018-19?
A) Sectors positioned to gain from a pickup in rural and from a business cycle recovery should benefit
Q) Do you see the core sector moving upwards after going through a slow down since last 2/3 years?
A) The pace of private investment is still lacking. But considering the low base and the slightly higher global growth, the core sector should begin moving upwards.
Q) Equity truly outsmarted every other asset class barring Bitcoins. What are your views on this buzzing asset class? Do you think it is a bubble?
A) Bitcoin is uncharted, unknown territory. The demand for any digital currency depends on many more variables than would a plain currency.
It is not easy to justify investing in it as it is not a government-backed issuance and to that extent is not as clearly dependable a store of value. It is a highly speculative investment and quite fraught with risk.
Q) What are you recommending to your clients?
A) We continue to urge them to look at risk profile and retirement expectations and then create a matching investment plan. Develop an asset allocation plan which works best for the individual both before retirement and after.
Use SIPs for MF investment and try and avoid direct investment in stocks as they may not have the requisite time and expertise to devote to the endeavour.
Q) After a blockbuster 2017, do you see domestic flows ebbing somewhat in the year 2018? If no, what is the kind of money you expect MFs to get in the year 2018? AUM level etc.
A) As credit cycle picks up and with Bank NPAs beginning to see some level of level resolution, money flow to equity, may decelerate but is unlikely to come down over the medium term as there are many who are using the SIP route.
Q) Retail investors are contributing to the MF through SIP’s and it has become one of the most preferred choices among retail and new investors? What’s the possible future of this trend for the small and medium term?
A) Like in every cult there are a group of recent converts who are eager beavers. Many of them may have been attracted by the recent returns in the markets and some of them will definitely exit at the first sign of trouble.
Incrementally the positive takeaway is the spread of the equity MF culture over a wider and more dependable domestic investor base, which is a very positive sign for the future of Indian Equities
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
