India still attractive for long-term; like cyclicals: UTI MF

Tough to put a timeline for new highs on Nifty but right now the market is breathing a sigh of relief from the fact that US Federal Reserve kept rates unchanged, says Lalit Nambiar, Fund Manager and Head of Research at UTI MF.

Sharing his outlook on the market with CNBC-TV18 Nambiar says the longer-term story for India does not seem to have changed and it continues to remain an attractive market relative to the rest of world in terms of our macroeconomic position. "We are poised to grow," he says.

However, he does advise investors to remain conscious about the quality of companies they invest into. UTI is more positioned towards cyclical stocks, he adds.

He also shared his views on specific sectors like consumer staples, banking among others.Below is the verbatim transcript of Lalit Nambiar’s interview to Prashant Nair & Ekta Batra on CNBC-TV18.Ekta: Your sense when are we going to see those new highs on Nifty by year end or earlier?A: Very tough to say that but if you look at broadly there seems to be a lot of positivity around the fact that the Fed didn’t do anything. So, to that extent I think we can all breath a sigh of relief and that is probably what the market is also doing. Having said that this has been quite a run and there could be always be a stage where you could have something spoiling the party for a bit but the longer term story of India doesn’t seem to have changed. We are still a very attractive market related to rest of the world in terms of our macroeconomic position and where we are poised to grow and to that extent the rest of the world gets that this is a good place to be and that is what we will focus on when we invest in our stocks and the quality of company which we look at.I don’t think we are too worried about what could happen in the shorter terms. So, while it is all good news today and in the last couple of days because of what has happened at the Fed I still think you need to be very conscious about the kind of company you buy into. Prashant: Other your peers at UTI that we have been chatting with over the last few weeks have sounded cautious, right? You also are sounding a bit of word of a caution not directly though and the feedback we have got is that it is kind of tough to find opportunities it may be relative opportunities etc but after the run up one may be even needs to lighten up a little bit do you share that view?A: It is a tough one because I don’t have a clear answer it is very tough when the earnings aren’t really coming through, you really want to see sales volume growth happening that is happening in bits and spurts. It is not happening at the rate at which the market seems to be discounting in the sense that the valuations have really run up. You really want something to be seen on the ground perhaps in more industries than we are seeing today. That is probably adding to little bit of discomfort. Of course markets don’t go in a smooth line there are zigzag and you tend to be cautious at such times. You would like to see some data on the ground, we would like to see companies making the right statements about business and that is not happening yet. While there are all the signs as I said in terms of macroeconomic indicators that we should be coming out of an economic trough. We still would like to see more and money continuous to flow, so if it is money going out perhaps real estate and gold domestically into equities and mutual funds and money coming from abroad into India because it looks like a safe haven it does create a little bit of a discomfort that perhaps wish we could see more in terms of performance at the corporate level.Ekta: What about private banks? I was just reading some statistics on credit growth where it is just been in single digits it continuous to be in the single digits for the past couple of months but obviously private banks have been outperforming especially the retail focused ones, but valuations are obviously stretched there. Do you find more comfort there despite high valuations? A: The story there has been one on market share and market share moving from public sector banks to private sector banks. Public sector banks being affected by the historic assets they have built up, the non performing assets (NPAs) they have built up. That has been a theme for some time and that has been run quite a bit that buy investors. Now to choose whether retail growth is a way forward does look like that if you are not seeing industrial activity it may seem to make sense if you are going to invest in that space. If you are going to play a growth story a revival and you want deep large cap stocks to invest in as national investor you will have to continue looking at private banks and perhaps at the margin at non-banking financial company (NBFC) and small banks. It is a function of size also in terms of what you can invest in. PSU Banks continue to be not so much favoured perhaps at the margin people are beginning to look at them try and figure out whether we are at the bottom of the NPA cycle. However, largely yes, I think at the margin there seems to be some amount of money flowing even into PSU banks. Prashant: Consumer staples, I just wanted your thoughts? Today there is for example one broker Morgan Stanley has downgraded their ratings on Hindustan Unilever (HUL). They say that financial year 2016 growth was only about 4 percent – revenue growth and you were earlier sounding anxious about overall sales growth not coming through. Valuations are still very punchy what is your view on staples because one is hearing the same thing about the others as well I mean Emami, Dabur a few other companies, growth not picking up, companies have been spending advertising etc, but that is not showing up in numbers. Competition is only rising and of course there is the valuation bit what is your view here?A: On the ground we have heard not so good news in the sense that like you have mentioned volume growth is not really there to the extent that people thought it would be it is all 2 percent and thereabouts. That is not a good sign because you will really want to see volume growth happening. You were hoping that the rural scene should pick up with good monsoon confidence should be boosted amongst consumer and you would see them spending and that is probably yet to happen and that has been a bit of a disappointment. That is perhaps the underlying theme there.This is a sector which has been flog to some extent in the sense that its earnings visibility is very high and reasonably certain that people will continue to consume these products. However, everything has a certain level of life even these ideas have certain level of life and after that perhaps it is time to look elsewhere. Prashant: Just to complete that point stocks will correct only if big funds like yourselves take that call right? That may be it is time to allocate to other sectors? When you say that overall sales growth is lacking is that likely to happen or is it a case of essentially there is no alternative, so you stick with these? Whenever markets have got polarised they have polarised towards these kinds of sectors staples etc? A: It is early days to write off the rural growth, rural story. We still have some juice left in that; monsoons are turning out to be pretty good in the end. Perhaps there is something there even now and we need to wait for a quarter. Having said that how we have been more positioned on the cyclical side and away from these names not so much in favour of these names as a house. We are hoping that cyclical turnaround will the country whenever it comes and we need to be positioned for that, so that is where we are placed.