The fund house is betting big on industrials and capital goods as it expects a recovery in the investment cycle and is also upbeat on the consumer discretionary space
The earnings slowdown in first quarter of FY20 is expected to turn around in the second half of the current financial year, which may witness strong year-on-year growth across sectors, believes S Krishnakumar, Chief Investment Officer, Sundaram Mutual Fund.
In a freewheeling chat with Moneycontrol, Krishnakumar said: "In the second half we expect good growth YoY across sectors, especially because of the low base effect from October and November last year. So that will provide some good lift up to numbers, and market is expected to take the numbers positively."
He also felt government actions will determine the pace of recovery going forward.
Krishnakumar advised investors not to get perturbed with the current volatility and slowdown in selective sectors.
In July, the Nifty fell nearly 5 percent.
While consumers, said Krishnakumar, may be struggling to finance big purchases such as vehicles and houses, smaller shopping expenditure are still on.
Segments such as washing machines, air conditioners, appliances, and pains have shown 8-30 percent growth in the first quarter, at a time when auto sales have dipped 20 percent, he said.
"The problem is not across everywhere but it is very much limited to few sectors so the government is working with the industry to understand the dynamics and trying to bring in some sops which will help demand creation and will also see to it that government is fiscally prudent," Krishnakumar said.
Sundaram Mutual Fund remains optimistic on equities as the earnings yield gap between the 10-year Gsec and equities is moving to a territory closer to zero or negative in case of midcaps to Gsec yields.
The market has almost bottomed out and from here on, it is expected to pick up, he said.
While there are data points which do indicate slowdown and continued pain, at the same time he feels, there are data points which indicate things are normal in many sectors on the ground levels.
The positive indicator is that India is among the two countries in the world where PMI (Purchasing Managers' Index) is above 52. The PMI an indicator of the economic health of the manufacturing sector.
The fund house is betting big on industrials and capital goods as it expects a recovery in the investment cycle and is also upbeat on the consumer discretionary space.Sundaram Mutual Fund is avoiding investments in metals and energy sectors and is sitting on cash levels of around 5 percent in its equity portfolio.Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.