Bullish on mkt; pick alcohol, media: Reliance MF

On Mahurat trading Sunil Singhania, Head-Equities at Reliance MF said things have been changing over the last few months and though, the conditions remain challenging there is a lot of optimism in the market. Therefore, he believes the year ahead is certainly going to be interesting and positive.

Also read: Bull mkt on; see strong reformist govt in '14: Jhunjhunwala Here is the edited transcript of the interview on CNBC-TV18. Q: How are things looking for the next year, first and foremost?
A: I think things have been changing for good over the last few months. There is definitely a lot of optimism, both on the domestic as well as the global front. If things stand where it is, we are looking at ensuing days, months and possibly the whole year with a lot of optimism.
The challenges continue and it is likely to continue because there are definitely some headwinds too. But, I think the probability of positives far outweigh those of negatives. Hence, I think the year ahead is challenging but, interesting and positive. Q: What do you hear from people through your mutual fund network? Are they in the early stages of conversion to think about stocks again or all you hear is skepticism? The stocks are just shifting from local hands to global hands, when do you see the changing around?
A: There is no doubt that there has been a lot of skepticism. It is not only in the domestic investors. I think there is skepticism globally, as we have international investors as well. So, money has come in from the global investors but it is just the handful of them. I think there are many who are waiting to be a part of this rally.
While in India we focus only on India. We see all the gloom and doom on a relative basis, compared to a lot of global economies. Whether it is Brazil, China, Russia or some developed worlds, India stands out.
As far as the domestic investors are concerned, I think last four-five years have had multiple opportunities to make money in real estate and gold. Last four-five years has been that exceptional period, where equity generally has been to some extent flat. I think there is still skepticism. But year to date returns, which a few of the funds have shown, are waking up these investors and distributors. We look at the future with a lot of optimism. Q: Is it a new high market or big global development or political development which will probably lead to a big switch in terms of how people see the market? Where is it headed?
A: There are two types of investors. Systematic investment plan investors have been continuously putting in money. It's the lumpsum investors who have withdrawn money from the market and invested in real estate and gold with the lure of alternate asset classes being not as good as they were in the last three four years. Probably that would be one catalyst. Interest rates coming down would incentivise investors to move from fixed income to equity.
I think it is going to be a combination of other asset classes not doing as well and equity doing well. You have seen the worst and it is going to be a combination of the two. The strength in the market on a sustained basis and the most important thing is lesser the volatility, more is the positive scenario from an investments perspective. If the markets run up too sharply, then also there is a case for investors wanting to wait. If there is a lot of volatility, then also they get scared. I think this kind of a market which is more stable, less volatile and at the same time slowly trending up is the best recipe.
Now all we need is alternate asset classes becoming less attractive and equities backed by some policy action and interest rate cuts starting to do well. I think that is also on the ground, so things are looking up. We were seeing 2003-2008 as a great period for the mutual fund and 2008-2012 was a period of consolidation. Hopefully, 2013 would be the year where we would again get into a period of rapid asset coming to mutual fund, specifically on the equity side. Q: What is the one sector you are most bullish on for next year?
A: One sector which has played up beautifully for us in the last three to four months is the spirits and the alcohol sector. We continue to be positive on it because it is a growing sector in India. But, there are a lot of upcoming sectors. I think media is a sector which is coming up very well. There is a lot of potential in terms of regulatory changes. After roti, kapada and makan the fourth thing we spend on is entertainment and that is coming up as an interesting sector.
We like another theme which is very small right now but has a potential, which would be anything to do with building a house. We are not talking about only cement, but interiors, cookery, crockery, furniture. There aren't too many ways to play in India. But, we analysed and saw that in other countries it has grown phenomenally well. In India, the earlier trend was to buy furniture which will last for 20-30 years. It is no more the case. That is one theme where we need to do our work. It is very early right now, maybe from a four to five years perspective that can be a theme which we can definitely look at, apart from the regular themes which would be banks.
Another theme which we would like is export oriented sectors. Rupee has again come back to 55 per dollar. The current account and trade deficit clearly points that rupee is not going to appreciate in a hurry. We are in a phase where even at these levels IT companies might surprise on their profitability front. Valuations are not very attractive. That is a large sector. There are good cash flow generating companies and that is something which we should not ignore.