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Last Updated : Jan 17, 2013 01:29 PM IST | Source: CNBC-TV18

See stock specific return; bets on exports: Mirae Assets

Rahul Chadha, Mirae Asset Global Investments, feels that the market may consolidate for next couple of months from the current levels. He also feels that rate cuts should come in and 20 bps rate cut is need of an hour from the upcoming RBI policy in January.


Rahul Chadha, Mirae Asset Global Investments, feels that the market may consolidate for next couple of months from the current levels. He also feels that rate cuts should come in and 20 bps rate cut is need of an hour from the upcoming RBI policy in January.


Below is the edited transcript of his interview to CNBC-TV18.


Q: Yesterday, we saw alomost a disappointment trade run, how are you calling the market at this point and do you see sluggishness or frustration around 6,000 mark?


A: I think from here the market will consolidate for next couple of months. More rate cuts should come in, 20 bps is almost a given. One needs to keep a tab on commentary which comes from the Central Bank, current account data and what reforms are carried in the up coming Budget.


Q: What is your view on earnings and the trend?


A: Numbers from the IT space has been surprisingly positive and private sector financials numbers have been in-line with the expectations. Earnings have bottomed, the clear issue is, do we see upgrades from here or not?


Q: What is your base case in terms of returns that you would expect in 2013?


A: The big re-rating for the market is over. The returns will be very stock specific. There are certain stocks in the benchmark where growth opportunities are limited and may remain flat to range bound. Apart from that we have 15-25 percent compounding machines in the market, which will keep doing their jobs. So these names did well for the last couple of years and will continue doing it.


The idea from portfolio perspective would be to overweight on secular growth companies and try to get out performance. We have seen near 10-percent rally from November lows on back of USD 8 billion of Foreign Institutional Investor (FII) flows. I think this will get tempered down for next couple of months and as June or September market rolls forward and looks at FY15 earnings, we get the next leg of up-leg in market.


Q: What about the potential of a diesel price hike? What kind of impact would it have for the market?


A: Some of these steps which have been taken in the past, oil price reforms were clearly much required. So they clearly increase conviction in the ability of the government to deal with all these serious issues, but one needs to see a lot more follow-through on this issue. Whether this gets diluted in three months from now or whether government sincerely follows it for six-nine months.


Q: What is you view on the up coming policy action on January 29 with respect to rate cuts. What is the most realistic scenario that we could see and what would the impact be on rate sensitive's?


A: We expect RBI to cut rates by 50-75 bps during the course of the year which is against the street expectations of 100-125 bps. I think inflation goes down till May, but Central Bank would be looking at current account deficit which is again a key concern for cutting rates in the economy.


Q: Tactically, how would you position yourself at this juncture?


A: We continue to remain overweight in financials. We have added some PSU banks in the last two months but financials continues to be overweight with a portfolio weight of about 30-33 percent. We are also bullish on exporters so we pick pharmaceutical and IT because the concern on the rupee still remains. Earlier we were bullish on telecom stock but now they had a good run so one can book profits in this space.


Q: What is your view on infrastructure and real estate?


A: I think the initial part of the rally is based on the momentum. A rate cut is a key to support the lagging real estate sector or industrials to come back and show earnings momentum because the first part of re-rating happens that the economy is kind of bouncing back. We have seen the trough of the economy but we expect a rate cut of 25-50 bps but beyond that due to current account concerns one cannot expect huge rate cuts and the part of the rally will fizzles out on this.


Q: The market is seeing huge money pull. Even yesterday when the market fell we still saw a very large pie figure in the cash market. What is pushing this interest is it still an India call or are they just playing the region long?   


A: Our investors and prospective clients are more comfortable putting money into a regional fund and let the specific team to take a call on which markets they want to be overweight/underweight rather than give the money to country specific ones because every country have their own set of issues. So clearly despite the strong perform one has seen from India we are seeing investors more receptive to regional funds then country funds.


Q: What is your view on the global market through this period that’s considered quite strong for India, the January to March run?


A: We are seeing little recovery globally and the Purchasing Managers' Index (PMIs) looks to inch upwards.


The structural issues remain whether it is Europe, US or China which is where we get a sub par recovery. The comforting factor is that the commodities remain fairly benign, so inflation will not be a concern for the next few quarters. We are constructive on equities, we are not out rightly bullish on equities.


 



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First Published on Jan 17, 2013 09:01 am
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