ET NowIn an interview with ET Now, Chakri Lokapriya, Head of India & ASEAN Equities, Copthall Partners, shares his views on how important the forthcoming Budget is from the equities’ perspective. Excerpts:
ET Now: Do you think that the market is witnessing correction because too much of positives have already been priced in? The NSE's Nifty looks toppy at around 9,000 levels, isn't it?
Chakri Lokapriya: The market is taking into account some likely positive news from the forthcoming Budget. The expectations this time around are higher than what they were last year. We do expect reforms on tax and detailed information on policies. In case things do not go as anticipated, we might see a certain amount of correction. Having said this, we believe any such correction would be short in nature.
ET Now: On Friday, we saw two large banks spooking the market sentiment. What are you making of the earnings so far?
Chakri Lokapriya: The earnings have revealed a couple of interesting points. The first point is the fact that demand has not yet picked up. This has been reflected in low volumes and lower margins of the companies.
In addition, you can see that companies’ capacity utilisation is still at very low levels. The utlisation levels are around 60 per cent. One must note that whenever demand turns around, earnings of companies will grow much faster because of this. We expect this happening in 2016. We believe that earnings can still grow and accelerate to 25 per cent. Margin will also be higher as the level of capacity utilisation will improve going forward.
ET Now: What are your key bets for 2015? What is the portfolio strategy that you will follow this year?
Chakri Lokapriya: We are overweight on financials and consumer discretionary sectors. We will be looking to add industrials to our list. Industrials will benefit big time because of falling commodity, metal and oil prices. The fall in input cost and interest rates will be an additional kicker which will kick off capex.
Financials, on the other hand, will benefit from higher loan growth, while consumer discretionary will benefit from lower interest rates.
ET Now: The most important trigger for equities, which the medium-term strategists are suggesting to us, is the forthcoming Budget. As a market participant, what are you reading? How important would the event?
Chakri Lokapriya: We are in the midst of a pre-Budget rally and the market does expect some news about tax reforms and clarity about infrastructure. In the infrastructure sector, we have certain costs which are market-determined.
But everything is not market-linked. For example, power tariffs are costs that do not reflect the actual market prices.
So, the government must come up with solutions. From that perspective, the Budget is important.
ET Now: Do you think that the market is witnessing correction because too much of positives have already been priced in? The NSE's Nifty looks toppy at around 9,000 levels, isn't it?
Chakri Lokapriya: The market is taking into account some likely positive news from the forthcoming Budget. The expectations this time around are higher than what they were last year. We do expect reforms on tax and detailed information on policies. In case things do not go as anticipated, we might see a certain amount of correction. Having said this, we believe any such correction would be short in nature.
ET Now: On Friday, we saw two large banks spooking the market sentiment. What are you making of the earnings so far?
Chakri Lokapriya: The earnings have revealed a couple of interesting points. The first point is the fact that demand has not yet picked up. This has been reflected in low volumes and lower margins of the companies.
In addition, you can see that companies’ capacity utilisation is still at very low levels. The utlisation levels are around 60 per cent. One must note that whenever demand turns around, earnings of companies will grow much faster because of this. We expect this happening in 2016. We believe that earnings can still grow and accelerate to 25 per cent. Margin will also be higher as the level of capacity utilisation will improve going forward.
ET Now: What are your key bets for 2015? What is the portfolio strategy that you will follow this year?
Chakri Lokapriya: We are overweight on financials and consumer discretionary sectors. We will be looking to add industrials to our list. Industrials will benefit big time because of falling commodity, metal and oil prices. The fall in input cost and interest rates will be an additional kicker which will kick off capex.
Financials, on the other hand, will benefit from higher loan growth, while consumer discretionary will benefit from lower interest rates.
ET Now: The most important trigger for equities, which the medium-term strategists are suggesting to us, is the forthcoming Budget. As a market participant, what are you reading? How important would the event?
Chakri Lokapriya: We are in the midst of a pre-Budget rally and the market does expect some news about tax reforms and clarity about infrastructure. In the infrastructure sector, we have certain costs which are market-determined.
But everything is not market-linked. For example, power tariffs are costs that do not reflect the actual market prices.
So, the government must come up with solutions. From that perspective, the Budget is important.
( Originally published on Jan 31, 2015 )
Get Unlimited Access to The Economic Times
