Moneycontrol
Last Updated : Sep 10, 2018 05:54 PM IST | Source: Moneycontrol.com

Worried about foreign fund flows; pharma meaningfully undervalued: Saurabh Mukherjea

Saurabh Mukherjea of Marcellus Investment Managers said he is not worried about India in terms of macro factors but fund flow from US is worried thing for him.

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Benchmark indices remain under pressure as consolidation continues on the first day of the week. And the consistent depreciation in the Indian rupee is further impacting the investor sentimetn.

"This is sort of time tested correction for emerging markets (EM) as money is going back to the US with double whammy effect of complicated picture of trade war and tightening of liquidity by Federal Reserve's likely rate hikes on EMs. So, the impact is evident," Saurabh Mukherjea, Founder, Marcellus Investment Managers told CNBC-TV18 in an interview.

He said he is not worried about India in terms of macro factors but fund flow from the US are a concern for him.

In FY19 so far, foreign institutional investors have been net sellers in equity, exiting investments worth about Rs 13,000 crore compared to Rs 1,000 crore worth of buying in same period last fiscal.

MSCI Emerging Market index is down 2.5-3 percent as fund managers are getting jittery about EM space.

Fund managers around the world know that generally Federal Reserve controls flow.

Around 55-60 variation in Nifty50 is depend upon macro factors like currency, interest rate, partly by RBI and Federal Reserve.

"So structurally long term stories like HDFC Bank, Asian Paints are there but rest of portfolio is cognisance of such liquidity problem. Recent environment give strong indication to fund managers that you can't ignore central banks," Mukherjea said.

He believes domestic economy is fundamentally a robust one.

Axis Bank

Amitabh Chaudhry of HDFC Life will take over as chief executive officer (CEO) and managing director (MD) of Axis Bank.

Chaudhry, who is replacing Shikha Sharma, will begin his new role on January 1, 2019 for a three-year term. Chaudhry is currently the Managing Director of HDFC Life.

"Board room uncertainty should be seen as good opportunity in the market. As far as Axis Bank is concerned, Amitabh Chaudhry has good track record in life insurance business but we have not seen him as banking personnel. So we can see degree of few more exits from Axis Bank," he said.

HDFC Bank, Kotak Mahindra and Bajaj Finance, which were leaders of last market rally, corrected 8-10 percent.

He said this point we are very circumspect about wholesale fund lenders due to higher bond yield, rising interest rate scenario. "So lenders with strong CASA franchise model look good at this point of time rather than wholesale fund lenders. RBL Bank and Bajaj Finance look good."

He believes overall stock market is overvalued by 15-20 percent and financial space, which has 40 percent of weightage to Nifty50, is overvalued by 40 percent now.

So there is big mass of overvaluation in financial space, whether it is wholesale funded banks, NBFCs or CASA funded banks, he said. "Housing finance companies, NBFCs, wholesale funded banks are bit of concern for me which include HDFC Bank and Kotak Mahindra Bank type of model but these are less worried."

Pharma

Mukherjea feels the frontline pharma stocks are undervalued. "Dr Reddy's Labs, Lupin etc are meaningfully undervalued."

In fact, the rupee fall has been substantial tailwind for the sector for last 8-9 months, which was absent for earlier 4-5 years, he said.

Overall export oriented stocks look good for at least next six months, he feels.

Tata Motors

Unlike some element of auto space, he does not see export story in Tata Motors and not even Jaguar Land Rover (JLR), and he is not sure of near term benefits from macro factors for the company.

JLR is not so supportive to the company like it was 4-5 years ago, he said, adding he is circumspect about exposure to the company.
First Published on Sep 10, 2018 11:54 am
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