In an interview with ETMarkets, Bhandwaldar said: “We also have OW on domestic pharma, hospitals, hotels and telecom. We are UW on commodities, energy and IT” Edited excerpts:
Sectoral indices are hitting fresh record highs which suggests that Nifty, Sensex could soon follow suit. What is fuelling the rally and way ahead? Do you see a fresh peak for Nifty soon?
One has to keep in the context that the market has been consolidating almost for the past 18 months. Earnings estimates are getting realistic and market valuation is more reasonable.
Incremental optimism is a function of relatively better earnings resilience, possible reduction in the cost of capital, and reversal of FII flows at the margin over the last 3 months.
Commentary from the RBI suggests that India is on track for robust growth and further rate action will be date dependent which is comforting the bulls. But, what can ruin a bull party on D-St? Anything that investors should watch out for?
Investors should keep a watch on earnings growth since the globe is slowing down. Geopolitics is also far more complex and any event on that side can hamper markets in the near term.
We have gone through time correction, but we (India) are no longer cheap. FIIs have started to pour money into the markets. Is it macro stability or earnings growth which is fuelling optimism?
We have clearly gone through 18 months of market consolidation. Valuations are more reasonable than where they were 18 months back, earnings are good on a relative basis as compared to most emerging markets and the interest rate environment has peaked and the cost of capital might witness a decline over 12 months.
Relative earnings attractiveness of the country, enabling structural growth environment and the resilient macroeconomic situation is driving FIIs to India again.
What about recession or economic slowdown in developed countries say the USA or other part of the world? How will that impact sectors here in India?
The developed market is slowing gradually as an outcome of 200-300bps of interest rate increases over last 1 year.
This will predominantly flow into externally focused sectors like energy, commodities and IT for us.
Which sectors are you overweight and underweight on and why?
We are by and large more constructive on domestic cyclical like Auto, Financials, Industrials, and Cement.
We also have OW on domestic pharma, hospitals, hotels, and telecom. We are UW on commodities, energy, and IT.
Any changes you have made to your portfolio recently?
Changes are an ongoing process in the portfolios. There is no specific and meaningful change that we have done in our portfolios at sectoral levels lately.
How do you pick stocks for your portfolio? What are the filters you use?
Key philosophical filters are quality of business, management, and balance sheets. After that, incremental earnings growth and incremental capital efficiency is what we focus on as a team.
What is your take on FMCG stocks? Recently, price action has increased in his space. What is leading the rally?
FMCG was impacted on the raw material side – where there is some correction underway, which is helping the near-term earnings. Though we have not seen any volume growth surprises barring 1-2 names in the space.
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