Kotak MF trims earnings growth to single-digits for FY17

“We are looking at 150-200 bps kind of impact on GDP growth for Q3 and Q4,” Kurian said.

India’s GDP grew 7.2 during the first half of this fiscal, and most economists expect the average for the full year to be below 7 percent.

Already, the RBI has trimmed its GDP forecast for FY17 by 50 basis points to 7.1 percent.

A music aficionado, Kurian, expects volatility in the near term as market reacts to December quarter earnings and the noise around the Union Budget.

Kurian expects the Budget to be largely rural focused as this part of the economy has been hit the hardest by demonetization.

On the global front, the market is awaiting President elect Donald Trump’s policies once he assumes office in January.

“Markets are also building in an expansionary US fiscal policy which will benefit US corporates, at least from an earnings perspective if he announces tax cuts,” Kurian said who likes reading fiction stories.

She sees demonetisation benefitting the financial industry as savers may shift from physical assets to financial assets and money may turn to direct equities, mutual funds or insurance.

In terms of sectors, the fund house is upbeat on retail private banks, automobiles, oil marketing companies (OMCs), and select consumption stocks.

“Structurally margins are improving for oil companies and government has also shown that they are inclined to reduce subsidy and so we continue to remain positive,” Kurian said.

“Our base case assumption is for FY17 oil prices will be $50 dollars (a barrel) and next year USD 60 per barrel,” Kurian said adding that oil prices will not go below USD 60 a barrel.

Reduction in subsidies help OMCs improve their working capital cycle.

For sectors like IT and pharma, Kotak Mahindra Mutual Fund is following a stock specific approach and selecting companies where revenues are relatively more predictable.

“We are underweight on IT and again very stock specific; wherever we believe that they have built capabilities invested in new technology, we have invested in those companies. Secondly companies which demonstrate that they can do cost cutting through automation we are investing in those companies,” Kurian said who likes spending more time with her 12-year old son Ishaan.

The fund house is bearish on telecom for now. “The impact of the new entrant on the existing players is still not fully played out. There might be some consolidation which could be beneficial for some (telecom players) but we have to wait and watch. As of now, we continue to be underweight,” Kurian said.

She further added, NBFCs that are in to loans against property business will be hit the most due to currency ban so they are avoiding NBFC stocks.

Despite the temporary blip, from a macro perspective India stands out among emerging markets, as our macroeconomic indicators are far more robust than they were three years ago.

On the Tata-Mistry controversy, Kurian said that the fund house has not rejigged Tata stocks so far in the portfolio. “Tata is name synonymous with trust. Nothing really changes due to the board issue but the way it has happened was not right…but from a company level wherever we are invested it really does not impact the earnings or the profitability or outlook of that specific company,” she said.