Even if oil recovers it won't impact Indian growth: UTI MF

A: We have done studies on the past bull markets in India since the late 1970’s and all of them indicate that this is going to be a multi-year bull market. There will be corrections as happens in most markets but those corrections will be opportunities to enter because this is one bull market like 2003 and 2008, which is backed by macro economic fundamentals. So, it look like all those indicators on inflation interest rates are going in the right directions and you are likely to see that at some point in time demand picks up volumes comes in, operating margins starts moving up and earnings start getting driven.

So, in a sense what you are seeing is the last one year or so you have seen sentiments sort of push the markets up and multiples move up and earnings hasn’t really played a role. However, from hereon possibly even if there is a breather, even if there is a correction the chances are that the macro will kick in and you will have earnings drive the market from hereon and that is very much that happened in 2003 and 2008. You saw corrections but innovatively the market gave huge returns thanks to the fact that the macro was with the markets.

Ekta: That is good point that you made that the macros are possibly going to be the big triggers for the markets in terms of a multi year bull run. Oil prices are one of the key reasons why we are seeing improvements in macros but from a stock perspective would you differentiate between stocks that don’t benefit from lower crude prices and which do or would it just be a consensus by considering that eventually all stocks will gain?

A: Oil is not so much of a factor it is something which you probably didn’t assume in your estimates may be six months back so this is a new thing and this is possibly a conducive thing and an opportunistic thing as far as India is concerned. However, at a cyclical level that really doesn’t matter because if you look at how India’s growth is poised versus the rest of the world we are actually on a positive or a virtuous cycle while the rest of the world possibly into a vicious cycle and that is the important point.

So, even if oil were to recover let say to Rs 100-105 it is not really that Indian growth is going to get destabilised. It is just that we manage to shave of some amount on our current account deficit. We managed to make things little cheaper and possibly help India come back on track a little faster. However, the macro still doesn’t change. Even if oil were to recover we still be on a good path so I would rather not differentiate between companies on their savings on oil. I would rather look at researches and demand which is going to happen in the coming months and year and how that is going to drive earnings.

Anuj: IT is one pocket where we have seen quite a bit of correction. One of the catalyst was Infosys found a selling stake, the last quarter numbers were not good even for leader like Tata Consultancy Services (TCS) but at current point the way the currency has depreciated again you think it warrants a fresh look at IT stocks?

A: We would continue to be positive on IT. This is one sector which is export oriented to some extent, it is where the cash flows are very visible. While growth may not be as much as we would like but there is definitely a certainty to that growth and I think that is worth paying something for. That is why probably why we will hold on to that. That is a sector to be invested in because the lot of other sectors for instance in the cyclical area have run up ahead of actual performance in terms of work on the ground, in terms of project activity, in terms of even areas like infrastructure.

There is lot yet to happen. So, it is may be little premature or rushed ahead and buy a lot of those stocks and is possibly make some sense to have stocks which actually perform on the ground in terms of numbers in your portfolio and to that extent IT fits the bill. So, I do not think one should get out of IT and one should stay invested in that space.