In an interview with ET Now, Aviral Gupta, Fund Manager-Equity, Indiabulls Mutual Fund, gives his views on the Indian economy and key sectors. Excerpts:
ET Now: This week alone we have seen something like a 4% run up in the Indian equity markets. There was some weakness today, but would you say broadly the direction is up from here on?
Aviral Gupta: We will break this into three parts what is exactly going on in the world economy. I will touch on Europe, the US, China and then India. We have had QEs, we have had LTROs, but has anything really worked? We really do not know what is going to work over there. Now coming to China, China is trying to shift from an export-oriented economy to a domestic economy. It is not going to happen in a day's time or a year's time or two years' time or even five years' time. Coming to emerging markets, coming to Brazil, growth rate has come down to 2.1%. Now where does India stand in all this? We are at very great advantage right now compared to other economies. That is the kind of view which I am taking in. Now how do we take advantages? Only if the government comes up with some reforms, some policies.
ET Now: What is the portfolio approach that you are adopting and do you think that someone who is sitting on cash now start putting their money into the markets? Are these attractive or compelling valuations according to you?
Aviral Gupta: Valuations are very compelling at this point of time. No doubt about it, but I would say you might get the stocks much cheaper from these levels. Let us see how Greece pans out and that will be the key deciding factor. Second thing is the markets globally have run up, but I do not think there would be that much of upside this time in case QE3 is announced. All those things have completely failed. So why would I trust another QE?
ET Now: Everyone has agreed that you will have a fractured mandate come out of Greece and there will be some development in Greece even if they do not leave the Euro. By the end of July Spain is going to default in some manner or the other because it has got to bail out its territories, it will have to seek an international bailout. Now given these two significant developments, do you believe that the markets or rather central banks will have to push ahead with some form of QE and that in turn can drive up equities and EMs irrespective of what is happening in Europe?
Aviral Gupta: That will definitely drive the equities and the EMs, but that turn will be a very short-term run. That is what I feel. If we want our markets to be sustainably on a bullish mode, the government has to come out with certain reforms, that would be the key. Because, as I said earlier, all the actions which have been taken in the past have failed completely. So what else can they bring now? Which tools are left there, that is a very big question mark.
ET Now: Let us break it down. If we look stock specifically or sector specific, which sectors would you start nibbling into which look attractive?
Aviral Gupta: We are still very bullish on rural consumption story simply because elections are due in the next two years. They may happen earlier also. In that case rural economy will be again flushed with money. They will push in money to the rural economy. So that is one sector which I am looking into. Secondly, some defensives like pharma are something which I am looking into, given the account specifically in lieu of rupee depreciation. I am very stock specific in IT. I cannot name the stocks specifically because of regulations, but a lot of bellwether have completely disappointed.
ET Now: How about the infrastructure sector, are you positive on that given some noise that came out of Delhi just two days back?
Aviral Gupta: Announcement, implementation and completion. They have to be cleared; more clarity is needed on that.
ET Now: For the markets you are basically saying that one should sit on the sidelines, wait for the dust to settle and then perhaps enter. What levels do you think one should look at?
Aviral Gupta: The current valuation levels are pretty comfortable at this point of time, but you can start nibbling in. That is something one can do. But I feel the downside risk is high even now because of the global events, and not because of India-specific events.
Source: http://economictimes.indiatimes.com/articleshow/13927756.cms?prtpage=1
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'I made my money by selling too soon.'
Website: http://indianmutualfund.co.cc/
Blog:http://indianmutualfund.wordpress.com/
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