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Last Updated : Sep 08, 2015 03:27 PM IST | Source: CNBC-TV18

Deploy cash when selling stops; do not buy today: Pramerica

Global investors are still positive on India because most other markets are running either on stimulus or on zero interest rates unlike India, said BP Singh of Pramerica Mutual Fund.


BP Singh of Pramerica Mutual Fund in an interview to CNBC-TV18 said it is not yet time to deploy cash and buy. Wait for the sell off to taper and then start buying.

Selling and redemptions could continue for a fortnight more. So do not rush to buy now but wait for bounce backs, said Singh. Today is not a time to buy, he added.
 
Although there have been redemptions seen by funds globally since investors have been booking profits, Singh said their fund on the contrary has seen inflows. In fact they have told investors that the house would deploy aggressively once the market stops selling.

Singh said global investors are still positive on India because most other markets are running either on stimulus or on zero interest rates unlike India.

According to him, those companies in pharma and IT space who are exposed to US would continue to perform better than others.

Below is the transcript of BP Singh’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: The wealth of opinion that we have got in the past couple of weeks seems to suggest that the most prudent thing to do now would to be to wait a bit before deploying money because you don’t know how much more this knife could fall. Is that your view as well?

A: We agree with you. There are couple of reasons because India at this point in time is appearing to be quite well placed but that is exactly the reason why we are seeing so much of sell-off because the entire emerging market economies are in bad shape. The emerging market funds, the regional funds are going through serious redemptions and looking at the data of the redemptions which are taking place, we expect this to carry on for another fortnight.

So, impact of that will come on India because if you see in the dollar terms, you see the Indian market actually has fallen the least. The investors are still sitting on decent amount of profit in this particular market. So, when you feel redemption pressure and in the context when you compare say in the Chinese market where 60 percent of the market is at this point in time illiquid or you cannot exit, investors are booking profit and we expect that to carry on for some more time and that is the reason why it makes sense to wait and deploy depending upon once we see the tapering of this sell-off taking place.

Here I would like to qualify that we do not believe that we are going to just keep going down because one needs to compare what is happening at the debt market with the equity market. You will see that there is not a single redemption coming on the debt side from the global investors which indicates that they are very positive on India. What they are doing at this point in time is just booking profit because they are under pressure elsewhere.


Latha: What about your own investors, are you seeing any signs of your investors telling you to stop Systematic Investment Plan (SIPs) saying that let things stabilise, why should I lose money month-on-month (M-o-M) or are there even redemptions?

A: We have been pointing this particular fact out to our investors in the past. We have been telling them that global markets are not in a bull market because you can’t have a bull market with zero interest rates. Other than India, the rest of the world is currently running on stimulus or zero interest rates. So, we have been pointing out to them that these volatilities are here to stay and will continue to take place.

India is an economy where there is no stimulus. On the contrary, there is some amount of liquidity withdrawal on the black money side which is taking place. So, these are the times when one should be looking to invest and in fact what we are seeing at this point in time, we went around aggressively speaking to our investors and we are seeing inflows. We have been telling our investors that we would be using this opportunity to deploy, not necessary right now or today itself, but as and when we see the market tapering off we will start deploying.

Sonia: You haven’t faced any redemption pressure at all in the last fortnight or so?

A: On the contrary, we are seeing some inflows.

Sonia: Come in on a couple of spaces that have been under severe pressure. One of them is the pharmaceutical space, not as bad as banking but in the last one or two weeks we have seen incremental fresh on pharmaceutical names like Glenmark Pharmaceutical, Divi’s Laboratories, etc. What do you do at a time like this?

A: We need to understand that some of these companies export to many emerging economies. What is happening now in countries like Brazil, Venezuela, Turkey and all those places, their currencies are completely out of control. The fiscal deficit and inflation over there is threatening to go out of control. Now, these are the places where if you are exporting your products, you are going to run into some kind of problem.

Pharmaceutical companies, those who are exposed only to United States or have a larger chunk to United States, those stocks are fairly stable. However, the one who are exposed to emerging economies are coming under pressure and so it is a myth that pharmaceutical stocks are completely stable. We have been pointing this out in the past that you need to take selective views on the stocks and you need to take into account where they are exporting to and what they are exporting.

So, the pharmaceutical sector will also come under pressure and selective stocks are coming under pressure due to the fundamental reasons.

Latha: There are a bunch of good companies in the auto ancillaries but lately I have been seeing a lot of selling and topping that list is Motherson Sumi. Would you use that space to buy at all?

A: As I mentioned that we would be looking to buy good companies but not today simply because we see some amount of sell still possible across the board because of the emerging market redemptions. Foreign institutional investors (FIIs) are going to sell, the domestic funds are not buying exactly what FIIs are selling; they are buying what they have in their portfolio and that is why the market is coming down. So, there is no need for one to rush and start picking them up right now. One can wait and buy on the bounce back.

more to come

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First Published on Sep 8, 2015 09:30 am
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