Time to switch from IT to pharma: Kunj Bansal, Acepro

Time to switch from IT to pharma

Do you think bulk of the macro adjustments is behind us? There is a clear message from the government that they are committed to keeping the fiscal balance under check, keeping the fiscal deficit target in mind. They will also not cut expenditure. How should market look at the measures? The government is trying to give a clear message that we are noticing the deteriorating macro numbers and we want to have a check on that. But if we look at the announcement, there is no specific significantly incremental measure which will make check it. So, announcements also are a part of the game and they also matter but in terms of execution, nothing significant has been announced which will make a significant change. Having said that, let us also keep in mind that the equity market has been completely oblivious of the deteriorating fundamentals. The oil price has been going up but so has the equity market while it should have been the reverse case. Interest rates have been going up again so have been the equity market. The equity market has not taken any cognisance of the deteriorating macro numbers, interest rates or oil price and all that. So, for the equity market, it is a non event. When it was continuing to go up with the fundamentals not improving or deteriorating, the non-incremental government announcements are not going to make any difference to the equity market.

What has been your portfolio approach? Are you sitting on cash, are you hedging or are you not bothered about the short-term macro movement? You seem to be pretty confident about the earnings growth in your portfolio?

It is not easy to answer this question. The Indian market has been in a phase where the standard methods of analysing the macroeconomic numbers, if they are not supporting, will have a negative impact on the market. As I was just saying, that has not been the case. Maybe, liquidity has been the driver, maybe the market is discounting more of the sustained longer term growth that will accrue to the Indian economy based on various reformative measures that have been taken over the last few years. To that extent, taking a cash call on the market has not helped and wherever one has taken a cash call including us also, it has not helped. We are not taking that. We are continuing to remain invested. When you do not do that and take a view based on the macroeconomic numbers, then you move on to the next state which is the microeconomic numbers. We have been taking a call analysing the result seasons. Quarter one results were over a few days ago. In another 15 days, we will start having the September quarterly numbers. That way of stock or portfolio selection will continue. I am in a position to take a broader directional call of the market continuing to go up or come down.

Do you think the currency weakness would continue to have a bearing on the way some of the exporters like IT, pharmaceuticals and other segments are moving? Would it continue to aid the stock movers as well, considering it has lasted now for a good one year?

In the short term, yes. Ultimately, in the medium to long term, the consumers of these exporters, the importers, the clients tend to ask the companies to pass on the advantage of the currency. If we look at the trend over the last five, 10 years, whenever the currency has depreciated in the medium to long term, it has not been a significant benefit to the exporters. But in the short term, till that benefit does not get passed on and the companies have open position on export, earnings benefit. .. Another point is it will indirectly benefit from the point of view of competitive exports from India vis-à-vis the other countries. That is a major benefit and which is where the Indian exporters were losing out over the last three, four years although as a country it was good that our currency was holding on. But that is where the exporters were losing out.

Within IT and pharma do you believe it is now time for tactical shifts? Should one move out of Infy and TCS and put money on Wipro? WiproNSE 0.80 % has been the laggard in the sector so far and with the $1.5-billion deal coming in, do you think that is a higher alpha play?

It is a shorter term call. Instead of within the sector IT switch, my preferred strategy would be to continue to switch from IT to pharma. Although we have seen a large part of movement in the pharma, in the last one, one and a half months, the pharma index is up about 12%. But a larger alpha could still come there. So, switching to Wipro which has a sustainability issue over the longer term, makes no sense. It is a fundamentally weak company and one or two order inflow here or there may still n .. What is your outlook when it comes to the consumption basket? I do not think there is any new outlook for me to give. The numbers have been speaking for themselves. We have been continuously seeing the sharp growth that has been there in the consumption sectors — both durables and nondurables. There have been two, three reasons; one of course, was the lower base of last year’s pending GST implementation. The consumption growth had slowed. Two, the growth which was partly led by the government’s push to leave more money, more disposable income in the hands of the people both rural as well as urban. Another important point is the continuous GST rate reduction which have been carried out on the consumer durables. That benefit is still to be seen in the growth numbers in the increased volume numbers of durables and that is where we could continue to see some growth.

Source : economictimes.indiatimes.com

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