Himadri BuchMoneycontrol
The demonetisation move has hit the returns potential of a slew of sectors. Subsequently, Birla Sun Life Mutual Fund, expects the Nifty companies to yield 8 percent growth by end of FY17, said Mahesh Patil, Co-Chief Investment Officer-Equity, Birla Sun Life Mutual Fund.
"Among Nifty companies, 43 percent (weight in index) are not impacted by demonetisation and 53 percent could bounce back in 2-3 quarters," Patil said in an interview to Moneycontrol.
"We may end FY17 at 8 percent growth with a hit of 300 bps due to the event (demonetisation)," he added.
Patil manages assets under management worth Rs 45,000 across 20 schemes at Birla Sun Life Mutual Fund.
The earnings momentum lost in the second half of FY17 could be found in second half of FY18. In line with this view, Birla Sun Life Mutual Fund expects earnings of Nifty companies to grow at over 17 percent in FY18.
The fund house stated that demonetisation is a continuation of the government's effort to weed out black money which would cause a setback of growth for the next two quarters. As a result, the fund house expects GDP to be impacted to the tune of 100-150 bps in the second half of FY17.
Patil said that the Indian markets are in a consolidation phase due to two major reforms -- GST and demonetisation. "One may go with a base case estimate of 10-15 percent returns from Nifty Index in the year 2017.”
According to the fund house, the key happenings along with initiatives like demonetisation have paved the road ahead for Indian economy to bounce back stronger than ever before.
The key themes that the fund house expects to play out are financials, consumer discretionary, pharmaceuticals, and information technology and oil & gas sectors.
“We think crude will remain in the band of 50-65 dollars. At higher levels you will see more supply coming from shale gas which will cap the upside from crude,” Patil said.
Among financials, the fund house is looking at private sector banks and non-banking finance companies, but going forward it expects corporate banks to record upwards of 50 percent to 60 percent earnings as Patil belives these asset quality issues have somewhat peaked out.
The fund house is running a neutral position in telecom and IT. On the rationale behind being neutral on IT, Patil said, “Structurally, there are headwinds in the IT sector because of moving from legacy to digital and not all companies are positioned to do from Indian context.”
However, Patil said few IT companies are available at reasonable valuations and are not losing out on an opportunity to lap up those shares.
Patil expects around 13 percent growth for large pharma companies in the next year.
Birla Sun Life Mutual Fund is witnessing strong inflows in both its equity and debt schemes. Patil further added that SIP book of the fund house has been growing sharply.
The fund house is sitting on 6-7 percent cash in its equity funds. “We are expecting some correction because of global events so that we can buy stocks at a reasonable price. There are enough opportunities to invest. We should see deployment of these funds in the next 1-2 months,” Patil said.
In the upcoming Budget, Patil said the government will try and give boost to the economy that has got hit on the back of demonetisation. Some sops are expected for housing sector, and SME sector and continued thrust on the infrastructure. Also, the government will try and spend higher for the rural sector which will eventually help boost the economy.
Patil further added that corporate tax may be lowered, and government may tinker with capital gains tax.
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