In an interview with ETMarkets, Bajaj said: “We are favorably positioned on the consumer discretionary sector, including Auto, EMS, urban consumption theme, Healthcare, Power sector value chain, Financials and underweight on Energy and Consumer Staples” Edited excerpts:
After a 2% rise seen in September in Nifty50, October started off on a volatile note thanks to geopolitical concerns. How are you viewing markets?
Over the past year, Nifty50 has delivered a robust 30% return, and mid- and small-cap indices have materially outperformed the large-cap during the same period. This strong performance was on the back of a domestic growth story, good visibility of earnings growth, a stable macro-environment, and resilient flows.We remain positive on markets from a medium- to long-term basis due to stable earnings and a stable policy environment. In the short term, market sentiment could be influenced by global events like geopolitical situations, US elections, policy shifts in China, and state elections.In addition, Indian market valuations are at a premium to their own history and versus other emerging markets. While the long-term fundamentals remain stable, in the short term we expect markets to be volatile due to some of these reasons.
SEBI has come down sharply on F&O trading to safeguard retail investors interest. Do you see this a move in the right direction?
I see SEBI’s measures on F&O markets as a move to protect retail investors. The F&O products are complex, and it may be difficult for a retail investor to understand and appreciate the risks associated with these complex products.
Therefore, these steps are in the right direction to build investors’ confidence and promote transparency and market stability.
This could be the much-needed correction/fall that everyone was waiting for. Any sectors or themes which investors can look at if they have a long-term time horizon?
Any meaningful correction in the market due to global events may present a valuable opportunity for long-term investors.
We are constructive on equities, on the back of strong macros, strong domestic flows, and continued earnings growth. At this point, we are looking at bottom-up stories within sectors and stocks.
On the back of strong domestic fundamentals, our portfolio is positioned in favor of domestic cycles. We like consumer discretionary, which includes Autos, EMS players, urban consumption themes, Healthcare, the Power sector value chain, and Financials.
Do you see FII money flowing towards China as India appears expensive now?
Over the past decade, Indian markets have outperformed China. Recently, the Chinese government announced a slew of measures to support a slowing economy.
I think there is a possibility that some of the FPIs reallocate part of portfolio allocations to China. However, any such decision is expected to be more tactical and not structural.
We expect that over the medium to long term, equity returns will depend on long-term GDP growth potential, demographics, corporate earnings growth, and the and the political and policy environment.
Which sectors are you overweight and underweight on?
We are positive on the markets from a medium- to long-term perspective. Our portfolios are positioned to benefit from the strong domestic economic fundamentals.
We are favorably positioned on the consumer discretionary sector, including Auto, EMS, urban consumption theme, Healthcare, Power sector value chain, Financials and underweight on Energy and Consumer Staples.
What is your call on crude oil? If the crude oil picks up because of geopolitical concerns our macros could take a hit. Your take?
Crude has gone up in the past few days due to geopolitical events. An increase in crude prices can impact us through various channels: a) higher inflation; b) negative impact on growth; c) higher current account deficit. At present, our external position is comfortable with CAD at around 1% of GDP and strong FPI flows. If crude prices rise further, then it could impact India’s macro as India imports a large part of its energy requirements. Ultimately, the impact would depend on the duration and extent of the rise in crude prices.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)