Government’s focus has been ‘Make in India’ by expanding the manufacturing base through the incentives either in the form of PLIs (production linked incentive) or anti-dumping duties. This trajectory is likely to continue assuming favourable election outcome, Umeshkumar Mehta, CIO at Samco Mutual Fund says in an interview to Moneycontrol.
Hence, industrials as a space can’t be ignored, a bottom-up approach would be a wise thing to do, he advised.
After the consistent northward journey in the auto space, Mehta, who has over 24 years of experience in the capital market, says markets are extrapolating the current run rate in auto numbers. And hence from safety point of view, autos can be avoided for the time being, he advised.
What is your take on the RBI monetary policy meeting outcome?
RBI MPC (Monetary Policy Committee) maintained status quo on the repo rate at 6.5 percent inline with expectation. India’s Central Bank is in sync with the world central banks such as the US Federal Reserve, Bank of England, ECB and PBOC (People's Bank of China) in keeping its interest rates unchanged.
There were no new surprises from the MPC as inflation continues to get closer to target levels and our economy continues to grow at 7 percent or higher for the 3rd successive year. India stands strong like a rock amongst other economies and our expectation is that interest rates will start pivoting sometime around the last quarter of this calendar year.
Considering the slowdown in flow of IPOs, do you think the companies are waiting for general elections event to launch IPOs?
The slowdown in IPOs principally was triggered by narrative of bubble zones in mid and small caps space followed by liquidity disclosures by the mutual funds. Markets have digested and settled for the time being and hence IPOs are again likely to be lined up because markets are still buoyant.
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Even before elections, we will see number of IPOs hitting the street because the capital appetite of Indian corporates is increasing by the day, and they do not want to miss out this opportunity to accumulate risk capital when there is ample liquidity.
Are you betting big on industrials space?
Government’s focus has been ‘Make in India’ by expanding the manufacturing base through the incentives either in the form of PLIs (production linked incentive) or anti-dumping duties. This trajectory is likely to continue assuming favourable election outcome and hence industrials as a space can’t be ignored, a bottom-up approach would be a wise thing to do.
Do you think the northward journey in equity markets is unlikely to see major negative trigger in FY'25, but the total gains at the end of FY'25 will not be like FY'24?
Markets are never in equanimity. The state of the market —greed and fear-, are omnipresent, which triggers the markets. With a phenomenal run since COVID, law of alternation would test the markets which may tilt it to react to triggers on the downside.
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Hence, it would be prudent to entail suitable risk management in place and appropriate diversification to take care of any eventualities.
Are you adding more exposure to two-wheeler and passenger vehicle stocks after reading recent sales numbers and expected growth in coming years?
Markets are extrapolating the current run rate in auto numbers and hence from safety point of view, autos can be avoided for the time being.
Do you think the core inflation is unlikely to see significant increase in the new financial year, though the volatility likely in food inflation?
The extreme move in inflation is behind us, incremental moves may happen on favourable or unfavourable commodities -crude oil in particular- and food productions.
Do you expect the China to clock better economic growth in current calendar year than previous year?
China will have the benefit of low base effect and hence current year will be better than the previous. Manufacturing index has started to ring louder combined with under ownership in equities can give positive surprise in equity returns as law of alternation and mean reversion is always at work.
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