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Last Updated : Mar 11, 2020 01:33 PM IST | Source: CNBC-TV18

Valuations still lofty for HDFC twins: Aberdeen Standard Investments

"One of our concerns has simply been that India is one of the most expensive markets and growth has not being coming through as expected," Hugh Young of Aberdeen Standard Investments said.

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Markets are going through volatility, many investors are sitting on the sidelines. So, at the moment, we are certainly not seeing money coming in, said Hugh Young, head of Asia Pacific of Aberdeen Standard Investments.

"We are not seeing open-ended mutual funds (MFs) -- we are not seeing cash rushing into the market at the moment. For us, it is more a matter of sitting on the funds we have, either rejigging our portfolio, adding to areas where we think have been oversold, maybe taking a bit of money out of areas that have remained very resilient. We do have a bit of cash in funds but typically that is a residual amount of one-two percent for eventualities and at the moment by and large we are sitting on cash particularly in open-ended funds, just in case there are redemptions,” he said in an interview with CNBC-TV18.

Speaking about Indian market, he said, “We typically remain largely invested. We don’t take major cash decisions when people have decided to go into a dedicated India fund partially because you never know whether they might have positions against themselves. So our portfolios by and large are fully invested. We do keep a bit of cash for redemptions."

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"One of our concerns has simply been that India is one of the most expensive markets and growth has not being coming through as expected. In India’s case - economic growth and earnings growth hasn’t been as strong as we were hoping for.”

“Broadly, financials could go through pain but it is going to be certain financials, which need to go through the pain. One of the issues, again specific to India has been that the financial sector is a bit of a mess and really hasn’t been cleaned up as it should have been. The silver lining in the dark cloud of Yes Bank is that things are being cleared up," he said, adding that as far the house is concerned, they have stuck with the quality end of the spectrum like the HDFCs, the Kotaks.  However, the issue there is one of valuation and that one could see the valuation come down but they are not yet tempted to go into the lower quality end of the financial market and prefer to stick with co-holdings in the good long-term winners, said Young.

He added that valuations are still lofty for the HDFC twins.

“China’s market has held up remarkably well considering the coronavirus issue. One would have thought China would be one of the worst affected markets, but it hasn’t been. There has been support coming in for the China market but if anything, it has got more expensive relative to India. However, in absolute terms India still remains an expensive market, " he said.

"I doubt there would be much major rejigging but given what is going on with markets at the moment, it is very hard to say anything with complete confidence,” he further mentioned.

When asked if he would increase allocations in Asian Paints, he replied, “We have been long-term holders in the paint sector. It has done fabulously over the last few decades. The holdings in that sector are far from cheap. The companies get long-term benefit from the lower input costs, so the house is comfortable  holding them at the moment," he added.

 

Source: CNBC-TV18

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First Published on Mar 11, 2020 01:33 pm
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