DAILY VOICE | Telecom sector a must-have now in any portfolio: Chandraprakash Padiyar of Tata Mutual Fund

Telecom sector today is a must-have in any investor's portfolio and the government focus on cybersecurity and fibre optics is very relevant for sustaining long-term growth, Chandraprakash Padiyar, Senior Fund Manager, Tata Mutual Fund, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpt:

Q) Prime Minister Modi emphasized on Infra, fibre optics, cybersecurity in his speech on the occasion of Independence Day. What are your takeaways and how will it impact these sectors?

A) Improvement of GDP growth-focused primarily on generating higher demand in the next 12 to 24 months. In order to achieve higher growth, a renewed push to infrastructure spend is a must and the government has made its intentions clear on the same.

Credit delivery by banks for the infrastructure sector needs to pick up the pace to achieve the government's objective.

Generally, most companies focused on the infrastructure sector, and there is a need to strengthen their balance sheets further in order to participate in potential spending by the government.

From our perspective, we at Tata Mutual Fund would prefer to own capital goods/engineering manufacturing companies rather than infrastructure construction companies.

Telecom sector today is a must-have in any investor portfolio and the government focus on cybersecurity and fibre optics is very relevant for sustaining long-term growth

Q) Equity mutual funds saw negative flows for the first time in over four years. What could be leading to the redemption pressure in MF? Does it look like investors are cashing out or is it the liquidity needs which investors have to deal with due to job losses etc.? What are your views?

A) I think one needs to see the context in which mutual fund inflows have turned negative – COVID-19 has the potential to impact job security, salary increases or consistency of salary increases and many small/large businesses were shut for a fairly long time.

It actually is normal for investors to dip into their savings in uncertain times. It is heartening to note that SIP inflows continue at a strong pace.

Q) What is your take on the markets? Do you think we could see some selling pressure when the Vaccine actually arrives? It will be a classic case of buy on rumors and sell on news?

A) Equity markets, as of now, in my opinion, are hoping for a strong rebound in 2HFY21 and FY22. The expectation is that COVID-19 lockdown led disruption to life will end soon and we will all return to our normal life once again next year – the vaccine is an important hope among investors.

In a way, markets are priced to perfection in the near-term with all the hope built into stock prices. In case the COVID-19 situation continues for longer than expected then there is scope for disappointment and hence volatility for the markets going forward.

Stock selection with growth at a reasonable price as an investment philosophy is the right approach to take in this market situation.

Q) Which is the biggest risk for equity markets globally - is it the trade war between the US and China, or the outcome of the US Presidential elections?

A) Covid-19 and monetary/fiscal policies of various central banks and governments are the key triggers and risks for the market going forward.

We are seeing central banks continue to push for higher growth with loose monetary policy and alongside governments throughout the world are now making a push through larger fiscal spending.

Any change in the direction on monetary or fiscal policies can create a risk to equity markets in the short term.

Q) Market might not go back to levels seen in March, but what would be a good level to enter in case we see a selloff in equity markets?

A) The question inherently is trying to time the entry into the markets perfectly. We are long term long-only investors focused on identifying businesses that can deliver healthy earnings growth consistently with free cash generation and available at a reasonable price. To us, every day is a good day to buy for the long term.

Q) What is your take on MNC stocks? Do you think they are better placed in this pandemic? If yes, which one tops your list any why?

A) Multinational corporations present in India tend to get a special status in the Indian Equity markets due to their access to high-end technology, global products, talent, scale, and an option to export to other geographies where the parent is present.

I believe MNC stocks play an important role in any equity portfolio, however, stock selection is very important in this case too.

Q) FIIs are net positive so far in the month of August in the cash segment of equity markets as compared to DIIs who are net sellers? If looks like investors back home are getting edge at higher levels? What are your views?

A) On a general basis, FIIs have been net buyers in the Indian Equity markets consistently every calendar year barring a few years like 2008.

FIIs currently owns close to 20 percent of the BSE500 market capitalization in India. Within a calendar year some months can be negative and some positive.

Directionally I believe India presents a very strong investment opportunity for FIIs and would expect flows to remain on the positive side over the long term.

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