See uptick in SIPs; like autos, financials: Motilal Oswal AMC

As a house, they are upbeat on financial services including NBFC and excluding cash focused MFIs and autos in spite of the near-term hit.

However, they are not bullish on cyclicals and metals, says Somaiya, adding that pharma has now turned into a contrarian buy from being a favourite.Below is the verbatim transcript of Ashish Somaiya's interview to Latha Venkatesh and Reema Tendulkar on CNBC-TV18. Latha: It is voluntary but do you think this is a good news for commercial vehicle (CV) makers? A: Yes, definitely. We have to see entire details of what it is. If there are incentives given, obviously people would want to take benefit out of it. Also, there are always these rumours that eventually one fine day there will be a deadline and you will have to scrap all these things so you better make good on the voluntary bit. So I am sure it is going to help. Latha: What is holding this market is domestic institutional buying, how is it looking at your end, are retailers still coming in and giving you systematic investment plans (SIPs) or new money in your focused funds? A: SIPs are rising significantly month on month for us as well as for the industry. Industry recently crossed Rs 1.2 crore number of folios and it is just under Rs 3,900 crore a month. I would urge everybody to look at it as a generational shift because if you see 10-12 years back, the RBI used to issue GoI relief bonds and they gave 11 percent risk-free and tax-free and a lot of youngsters when we started our jobs 18-20 years back, it was normal to open a PPF account, go to State Bank or in the Post Office and nowadays I find youngsters open SIPs. So my sense is in a year from now we will be over Rs 5,000 crore a month. Latha: The recent fall in the market from the July highs has not deterred retail investors? A: No, I think our investors are reasonably seasoned now and whenever the market falls off, the first instinct is to take benefit of the lower levels. When we were at 9,000 sometime back, we were 6,700 in February so these are attractive levels from that perspective. Reema: What is the big India call that you are making in 2017 for equities because the dollar index has gone up, the US is pushing for growth, that could result into the money going to the developed economy assets, the rise in US rates could limit the rate cuts that we could see here, there is demonetisation, all these things seem to be a lot of put overhangs in the Indian equities? A: There are a lot of events to watch out for irrespective of what the expectations have been, starting from January 10 or January 15, we will see results, then Budget and then there will be elections and then there will be US to watch out for. So very eventful first half for sure but three-four trends are definitely going to come out of whatever happens with demonetisation. First is that there is probably a shift from unorganised to the organised sectors, second the government becomes a very big investor and thirdly liquidity being high and rates being low, these are three-four things which will matter and I think there will be good. The tax net widening, a lot of people are focused on the existing stock of black money, not enough people are focusing on the fact that new generation of black money is under severe threat. Owning so much real estate and gold is certainly not cool, interest rates are very low so we will see people moving money into equities. That is my sense. Lastly, when you look at US, foreign institutional investors (FIIs) pulling out money. In the last ten years I have seen it happening four times, FIIs have always pulled money in response to some trigger in the international market but when the dust settles, eventually you get back a lot more than you lost. Latha: Do you expect assumption to get a fairly longish knock? There has been a loss of wealth effect maybe for some people, would be it two quarters, you will have a lot of consumption stocks in your QGLP or Focus. A: Clearly, the guys where there is a lot of luxury buying or the top-end stuff, obviously that is going to take a knock, there is no debate about it. However, if you look at guys like four-wheelers which are largely 80-85 percent financed, that is one thing. Secondly if you see wealth destruction -- for a lot of people, officially or unofficially is wealth redistribution for a lot of people and ultimately some Rs 14-15 lakh crore which was lying under someone\\'s pillow and lying in someone\\'s drawer is back into the bank. So getting money into the market, velocity increasing, all those things are going to matter significantly. Our sense is good part of non-discretionally consumption will come back in three-six months at the most. Reema: Which are the sectors that you would recommend and avoid in 2017? A: Typically, at our end we are not a sectoral investor in that sense. Reema: At least broad themes to avoid? A: Broadly speaking, at our end, we are not heavily into cyclical, we are not heavily into metals, because metals clearly you get confused with what is investment buying and what is so called Chinese GDP effect etc. So we stay out of deep cyclicals, we stay out of metals typically speaking, what we do focus on is financial services significantly. Good part of financial services is one part. Second is we are pretty much into autos. There is a knock at this point in time but our sense is next three-six months is going to be a significant turnaround. Also, most people are not realising that couple of percentage point drop in interest rates, if you ask me, 20 year mortgage rates are down to 9 percent right now, probably they will head lower. So these are some areas that we would look for. Latha: So housing finance would be a big theme that you would look for? A: Definitely yes. Latha: NBFCs have not been the fashion for the last quarter after such ra-ra days in the first three quarters. That still is an attractive space? A: People have tended to paint everything with a broad brush. There are obviously types of NBFCs that one needs to look for. So what we have in our portfolios is pretty resilient in that sense. We are not into the microfinance space or we are not into the cash dealing kind of segment at all. Reema: Sun Pharma, Lupin, all down 20-30 percent in 2016, is that the space you look at and will it turnaround? A: We do have a significant holdings in across our portfolios. What used to be a favourite has certainly turned into a contrarion but it still looks good.