Standing by portfolio; broad thrust won't change: UTI MF

Speaking to CNBC-TV18 Lalit Nambiar of UTI MF said that he is sticking with his portfolio. The broad thrust won’t change because of what has happened, he said, referring to the demonetisation drive.

He believes upcoming state elections in UP and Punjab could have a sentimental impact.

He would be looking at the management track record in the NBFC space.Below is the verbatim transcript of Lalit Nambiar’s interview to Prashant Nair and Ekta Batra on CNBC-TV18.Prashant: What is your current assessment of things, markets are doing what they are doing and we are all seeing it but how does it relate to economic and business activity on the ground, is it over playing or under playing it?A: Tough to say because the data is still coming in. As somebody just a little while ago on your program talked about it that people are taking one month at a time. If you look at the data put out by people who are studying the ground level data such as CMI who is doing surveys, there doesn’t seem to be so much of a disruption. However, it is early days yet and people when in doubt, they try to tend to sell out. So, when there is uncertainty, people tend to be nervous and there is a tendency to such selling, you book the profits you have on the table, you try to take the money off the table. So, a bit of that is happening.Like somebody mentioned, some metal company which has run up, if you see some profit there, you take that profit off. So, that activity is on-going. However, I think the longer term perspective, the medium term perspective, has not changed. We were in the midst of what looked like a beginning of a recovery. Very early days and that has possibly got pushed back by a quarter or two at worst. I think there is a bit of a bias towards the negative, towards the fact that things are going wrong, the story is getting derailed but if you really step back a little and look at the longer term story, if this demonetisation thing is played through, things should come back to normal.Now, the pace is debatable but the overall economic trajectory would not change and I think that is what we try to hold in front of us when we look at the investment horizon at which we invest which is in excess of nine months to one year to two years or more and that is when you really look at where the economy is headed, where the domestic story, India story is relative especially to the rest of the world and I don’t think that story has changed dramatically. In equities you need to be a little bit patient and you really can’t time the markets. So, it is better to focus on where the economy is headed and invest accordingly.Ekta: What would you do in a situation where say hypothetically, in a hypothetical situation if you have holdings in say a Bajaj Finance or an M&M Financial and they come out and they say that we don’t know how the next one to two quarters are looking or we don’t have much data beyond this one month, what would you do with your holdings in Bajaj Finance and say an M&M Financial? Would you stay on or would you take some profits at those levels? A: Hypothetically if I had either of let us stocks in the NBFC space, not necessarily those two, I would look at where the management is in terms of maybe what it does in a bit of a crisis, the nature of its track record and I would look at the situation on the ground, if it is something which is temporary or whether it is something structurally impacting the company. If it is going to be something which is probably a quarter or two quarters worth in terms of waiting, I think if the story is strong enough and the valuations are reasonably fair, we will continue to stick with those stocks; not necessarily those two.Prashant: You have a slightly longer term view so you and others, the insurance side have even longer term views but what you are saying is you will stick with the portfolio that you had before the November 8, there is no real reason to change it? A: You can do some tactical stuff on the margin but that is really not investing -- in the sense you are probably trying to specifically do something for a couple of months or two quarters. However, your broad thrust will not probably change. Prashant: Because of what has happened, do the upcoming state elections become a little bit more important, I mean UP and Punjab, in the next two months? Will it become more important from a market point of view? A: Election results in states sentimentally do impact to the extent that there is underlying theme that part of the activities which have happened may have a bearing on the elections directly. To that extent there could be disappointment or euphoria. However, it doesn’t really take away from the broader trajectory of where the economy is headed. I don’t think the state election result outcome is going to make a big difference unless you can use it as a bearing on the 2019 parliamentary elections. So, I don’t think that kind of reading can be done because even today if you think that the incumbent parties are in advantage sentimentally and that it has the support of the popular voter, the common man, these things may change by the time we come to 2019. So, similarly, if state election goes either way, you can’t really extrapolate that and figure out as an advantage or a disadvantage. Markets however will react and that is the nature of the market. However, at the same time, there is an undercurrent which focuses on the fundamentals which looks at where the market is two years from now, one and a half years from now. So, 2017 has gone, we will have to focus on 2018 and 2019 and if that looks fair, international investors will look at it and so will Indian investors. It will take a few months to get there but as I said, you can’t time that. Ekta: Would you apply that same logic say looking at an issue 12-18 months down the line with the entire Tata saga which is playing out? We have all the EGMs which are lined up, we have TCS today itself, we have some statements coming in right now with regards to Tata Steel as we speak. What is your sense in terms of whether you would pare down your holdings on Tata stocks or just wait it out and see what happens? A: I think without going into specific companies, some of these companies, all of these companies are well managed in terms of a professional team at the top who do the day-to-day activity. It is only the strategic aspects which come up for discussion in these kind of situations. I think that has not changed dramatically. To that extent, I think we will continue with whatever investment thesis we had on the business and the sense we are getting from managements that broad strategy is not going to change dramatically.