Chances of Brexit low; Indian markets to stay calm: UTI MF

The probability of the British exiting the European Union seems very low, says Swati Kulkarni, Executive Vice President and Fund Manager, UTI MF. So she doesn't expect it to affect Indian markets. Also, she said the possible US Federal Rate hike in July will not be a shock and will not shake up the Indian markets.Kulkarni also spoke of the fourth quarter earnings, saying they have mostly been in line with expectations especially for auto and cement sectors. She expects a pick-up in rural demand for the auto industry with hopes of above-average monsoons in India. The momentum of an earnings growth may probably pick up in the second half of current fiscal.When asked about the metal space, she recommends avoiding the commodity space as she feels current price trends are not sustainable.Below is the verbatim transcript of Swati Kulkarni’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.Ekta: Fresh Nifty highs for 2016 do you think that may be the global markets could be a spoilsport considering that we have a possible Fed rate hike looming, we had the Brexit to deal with as well?A: On the Fed rate hike expectation there is an increasing probability that it will be there in July. So, I don’t think that is going to be a surprise for market. As a regards to Brexit the initial analysis is that there is a very low probability that Britain could think of exiting the Europe at this point of time. So, yes if anything comes outside this the volatility might increase but as of now it seems that markets are factoring on the positive of this.Anuj: The last few weeks we have seen economy facing stocks do really well whether it is the capital good stocks even couple of PSU banks, the economy facing banks have also started to do well do you think this space can make money going forward?A: We have been sharing that our focus is towards domestic economic cyclical stocks, so that seems to be working now. Probably, some bit of monsoon expectations are also built in this and the results gone by we have seen strong set of numbers coming from some of the auto names, discretionary side of consumption and also in terms of some of the cement names and the private sector banks especially on the retail side. So, these are giving signs that yes the underlying assumption that the cyclical recovery is underway seems to be there in the results and the stock performance thereafter. Ekta: How about autos in the same theme and context of a possible normal monsoon?A: Rural side of the automobile especially in the two-wheeler side that we have seen that the drought has affected two-wheelers and tractors side of the business because we had two successive droughts and that is likely to comeback if the monsoons have been good. Though it is unfair to expect any traction immediately in the first half but then second half we are pretty hopeful that it will start showing on the numbers. Also we have a 7th Pay Commission related payments happening and that could also support the discretionary demand in the auto space. Anuj: What about metals, do you think the global headwinds will continue. At current levels is this a good risk to reward or would you avoid the sector?A: The dollar index has been going down and to that extent you have seen all commodities also prices going up. But in terms of any absence of structural demand driver there we are not pretty confident about sustainability of the current price trends that we are seeing in commodities. So, at best we will avoid. There are always tactical plays that keeps coming and going but it is very hard to really catch them at bottom and hence best it is avoided and we could play the more sustainable domestic cyclical recovery than looking at the global cyclicals at this point of time.