Although one cannot totally rule out rate cut by the RBI in the upcoming meet on Ocotber 4, the odds are in favour of rate cut in later, said Swati Kulkarni, Exec VP & Fund Manager, UTI MF.
Swati Kulkarni, Exec VP & Fund Manager, UTI MF in an interview to CNBC-TV18 shared her views on earnings outlook going forward and sectors/spaces they are upbeat on.
According to her, the trend for second quarter earnings look good with better numbers likely from cement and retail oriented private sector banks.
Retail banking has been showing good growth with improvement in income levels and liquidty situation post good monsoons and improvement in macros, says Kulkarni. Although industry credit growth looks stagnant, there has been high double-digit growth in services side and the agri-finance space too has picked up.
Although one cannot totally rule out rate cut by the RBI in the upcoming meet on Ocotber 4, the odds are in favour of rate cut later, says Kulkarni, adding that one could see 25-50 basis points cut by end-FY17.
The house she says is constructive on defensive sectors like pharma and IT on account of valuation comfort. Domestic pharma would do better.
Below is the verbatim transcript of Swati Kulkarni’s interview to Ekta Batra and Prashant Nair on CNBC-TV18.
Ekta: What do you think in terms of segment is looking good especially ahead of the Q2 numbers?
A: The point which I want to make as far as Q2 numbers are concerned is let us look at some of the trends like you have seen automobiles for example. The way they have shown growth in year-to-date (YTD) numbers versus what it was three years average or five year average, definitely there is a trend which is showing an improvement. Now, it is very difficult to call it a quarter-by-quarter analysis and that too in a volatile world like today. The trends are quite heartening. Same I would say about the consumer discretionary space and that is what is looking good for us.
Also, if you look at some of the names in cement for example or the private sector retail banks where we think that things are likely to be good. So, if you dissect just the non-food credit, the industry credit is really stagnant or it is hardly growing but agriculture, personal finance and also the services side is growing in double digit, high double digit or high teens for personal loan. So, clearly the retail banking space is growing and the numbers there could be showing steady performance that they have been showing in the past also.
Prashant: Is there any concern that credit is growing in segments, which one can describe as unsecured? I mean the rate of growth -- if you dissect personal retail loan -- is more there in the unsecured segment.
A: That is a correct observation but looking at the overall macro fact that the income levels are gradually improving. The liquidity situation on ground is going to improve with good monsoon. Yes, the growth rate you could debate like you may find some companies, which are growing exceedingly -- maybe 50 percent plus or 60-70 percent plus on their loan book you maybe wanting to be little cautious on them but some of the other companies, which are growing in a steady way should not be so much of an issue particularly when the macros are on the recovery side.
Ekta: What are your thoughts on the October 4, Reserve Bank of India (RBI) policy and from a market perspective is the best factored in?
A: As far as policy is concerned what we hear from the initial interaction of new governor with the economist is that inflation is not so much of a concern now and there is a pro-growth kind of a focus. But to expect anything in this particular policy -- you have now the monetary policy committee (MPC) also going to be functioning. So, you will have to hear some views from there also.
I would say that you cannot totally rule out a rate cut in this policy but then the odds are in favour of a rate cut later. In any case, as a fund house we are expecting about 25-50 basis points (bps) cut during this financial year.
Prashant: What else are you doing even as inflows from investors continue to you, where are you deploying apart from what we have discussed?
A: That is very much there like these are the segments we are positive, constructive on the other two defensive sectors like pharmaceuticals and IT mainly on account of the valuation comfort that we have particularly pharmaceuticals -- the domestic facing pharmaceuticals are looking attractive at this point of time.The Great Diwali Discount!
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First Published on Sep 27, 2016 12:25 pm