Speaker: Mr. Sankaran Naren
Designation: Executive Director & Chief Investment Officer (CIO), ICICI Prudential Asset Management Co. Ltd.
Q.1 View on Indian Equity Markets (00:10)
Ans – Our view is that mid and small caps have been correcting since January and we have a situation where earnings growth is improving in a number of large caps. So from that point of view, there are positives and there are negatives. The negatives are clearly that you have a trade war in the world. You have impending election in India in the next one year. You have crude oil which has gone to a different level and you have US increasing interest rates. So our view at this point of time is we have headed for period of volatility supported by expanded earnings because we have not had good earnings growth for quite some time. So our principle is that right now in banking, the most important product is SB account. So like that for us best way to look at investing at this point of time is S, B, A and C. S being SIP. We think long term SIP is the way to invest at this point of time. B is that we clearly think as a category balanced advantage kind of defensive categories are powerful for investing over the long term. The third which is important is asset allocation and in our opinion, a number of investors have not invested significantly in debt through the mutual fund route and they should look at debt in the mutual fund arena and C is we think that closed-end funds are another way of deploying money. In closed-end funds, you invest with a long term view because anyway money is locked-in for a period of time. So we think that both SB account and SBAC in Mutual Fund industries are ways to move forward.
Q.2 Possible headwinds for the Indian equity markets (02:07)
Ans – See there are things like known, unknowns. There are elections, crude oil, US interest rates and what US will do with their Fed tightening. So these are the known unknowns. There are unknown unknowns like what Donald Rumsfeld says these are like what happens in trade war kind of thing. But in our opinion, if there is a period when there are no problems, that is the dangerous period for investing and the period when there are too many problems and valuations are attractive, is the time for investing. If you go back in history in 2007, everything looked good and in 2008, everything looked bad. So I don’t worry too much about the current headwinds.
Q.3 Sectoral view (Bullish) and the ones to be avoided (02:56)
Ans – See primarily if you look at it, we have had a long period where export oriented industries did not do well and with crude oil going up, you have current account deficit going up and dollar appreciating. We are of the view that export oriented industries is one of the segments which can do better than what they did in last 4 years. On the other hand clearly if you look at sectors like NBFCs which actually have done well and are very leveraged companies. These are the kind of areas which we would still be much more careful on compared to what we were a few years back.
Q. 4 Views on current earnings season and growth for FY’19 (03:41)
Ans – I think barring a few companies, earnings growth has been good this season and last year there was a base impact of GST which is not there this year. We have had a number of companies reporting good earnings. We are pretty positive on earnings growth over the course of next 12-24 months. You have to also remember for the last 4 years earnings growth have been more muted.
Q.5 An advice for our equity investors (04:10)
Ans- In our opinion, existing investors have to re-look at their asset allocation, think whether they are over-invested in small and mid-caps or over-invested in equities and also consider investing in debt, particularly low duration debt funds. On the other hand as far as new investors are concerned, we believe that they should actually go into SIPs in a big way and I think SIPs are the way for new investors to invest in and we believe that they should also consider categories like balanced advantage and debt at this point of time.