Last Updated : Dec 04, 2018 08:36 AM IST | Source:

Strategy 2019: Consumption, industrial, capital goods top sectoral bets for next 1 year

Tata AIA Life Insurance' Harshad Patil says he expects the MPC to hold the repo rate at 6.50 percent on December 5

Kshitij Anand @kshanand

While the consumption sector continues to be the best bet in India, industrials, especially those in the short-cycle capital goods space, can present a good investment opportunity in 2019, says Harshad Patil, CIO, Tata AIA Life Insurance.

In an interview with Moneycontrol’s Kshitij Anand, Patil talks about his take on the market, how he expects corporate earnings to pan out, what he thinks investors should bet on and much more.

Edited excerpts...

Q: After a 5 percent gain in November, do you think the rally will continue in December?

A: While the recent bounce can largely be attributed to the drop in crude oil prices and subsequent stabilisation of the Indian rupee, the markets can remain volatile on the back of increased uncertainties on account of ongoing state assembly elections and the general elections next year.

Q: Do you think earnings will see an uptick in the rest of FY19 and FY20?

A: The earnings are likely to show an uptick in the second half of FY 2019 as we see a revival in demand as well as abating cost pressure, given the fall in crude oil prices as well as prices of other commodities.

Q: What are the sectors you are recommending to your clients and why?

A: While the consumption sector continues to offer the best bet in India, we believe the industrials, especially the short cycle capital goods space, can present a good investment opportunity in 2019.

Q: FIIs poured in more than Rs 10,000 crore in November. It seems like they are back on D-Street. Will the trend continue in December?

A: We have seen historically that the foreign investments in Indian equities remain largely muted towards the end of the calendar year. We expect the same this year as well.

However, the rise in domestic fund flows from domestic mutual funds and insurance companies largely mitigates any significant drop in the FII flows and supports the market.

Q: What are your expectations from the upcoming RBI policy meet?

A: We expect the MPC (monetary policy committee) to hold the repo rate at 6.5 percent in the RBIs December policy review as they await the subsequent inflation prints.

While MPCs calibrated tightening stance does not categorically rule out a rate hike, the sharp improvement in macro factors as well as the CPI inflation prints over the recent months that stays below RBIs projected inflation trajectory has ensured that the pause in the monetary policy review would be the base case.

Q: Given sudden appreciation in rupee, do you think it is time to re-look at IT and pharma?

A: We believe IT and Pharma sectors are reasonably priced and we see opportunities in some select names in these sectors. Moreover, many stocks are trading at fair valuations in these sectors.

Q: Many large-cap stocks have corrected from their 52-week highs. Do you think they are still a better bet than to mid-caps and small-caps?

A: We expect mid and small-cap stocks to outperform in the long term even as the recent correction in the large-cap stocks offer a near-term opportunity.
First Published on Dec 4, 2018 08:36 am
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