S Naren, Chief Investment Officer of ICICI Prudential Asset Management Company predicts that 2016 could be the bottom of the economic cycle but investors should not wait till improvement in earnings happen. Excerpts:
MFs seem to have a big role in selling by domestic institutional investors…
Normally March is a month wherein people redeem to pay income tax.
So, from MFs’ perspective what happens in March is not very material.
In January and February, there has been slowdown in inflows. Past returns have not been high and investors generally invest seeing these.
Mutual fund investors should put money when times are bad and there are more sellers.
You have become number one based on AUM. How do you plan to remain there?
The overall market is very large and we have tapped only a small part. There is a huge requirement of increasing investment in dynamic asset allocation funds, hybrid products, debt products and so on. There is huge scope for us to expand customer base across India.
Markets seem to have got their base now. Are we going up from here and why?
Did anyone in February predict that there will be such stupendous move in March?
Over the next two to three years, market might do well as there will be improvement in the economic cycle, which will in turn result in better earnings.
Any themes that have attracted you post Budget?
We maintain our view that the agriculture theme and companies related to monsoon will play out in next few years.
Which sectors attract you valuation wise and fundamentally?
There are huge areas in corporate India where the capacity utilisation is low and is likely to go up in the next few years. Such sectors include cement, capital goods, infrastructure, telecom, oil and gas. We are titled toward these cyclical sectors.
Global factors delayed the economic recovery in the last one year followed by the NPA issues. We believe 2016 could be bottom of the economic cycle. Hence, one should not postpone their investments by waiting for the earnings to come.
What is your comment on beaten down sectors such as metals and PSU banks?
PSU banks as a space seem to have bottomed out. Metals is a sector where operating leverage has to play out globally also.
Will we see 2002-2007 kind of bull market ever?
Globally we are not into the phase of 2002-2007. We don’t see those days coming back because demographics in vast parts of the world have deteriorated. You can add huge growth only when demographics are supportive. It will be a more moderated bull market compared to 2002-2007.
