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    Overweight on auto, cement and underweight on metals: Lalit Nambiar, UTI Mutual Fund

    Synopsis

    Preferences are with sectors which are going to recover earlier in the economic cycle.

    ET Now
    In a chat with US, Lalit Nambiar, Senior VP & Fund Manager, UTI Mutual Fund, says his preferences are with sectors which are going to recover earlier in the economic cycle. Edited excerpts

    ET Now: Seems like this market is headed southwards. What according to you are the big concerns because it seems like all is well, the earnings seasons at least domestically has panned out as per expectation if not a tad bit better and there is every sign that the monsoon is going to be better than last two years, in fact normal. So what according to you is causing this amount of worry in the market right now?

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    Lalit Nambiar: It is difficult to talk about a specific day but I think a couple of things on the horizon, one is obviously the concern regarding what the US is going to do on the labour data which I think is coming up tomorrow. So the Fed statements on what it is going to do in terms of rate hikes, if they happen, when they happen, are they going to be pushed back...are some of the things on peoples’ minds. And of course the Brexit issue, the referendum which is still further away. That probably is something which plays on peoples’ minds as well. But I think, after the recent run up in stocks, the market is probably taking a breather and that is what you are seeing today. And even the stories around the commodity pickup, the monsoon factor have got a bit discounted. And I think some people are taking profits and shifting their portfolios.

    ET Now: What is that you are advising right now in terms of sectoral allocation? Where does one derive comfort from in these volatile markets and where do you see earnings growth?

    Lalit Nambiar: I think firstly, we are looking at back ended earnings to the market as a whole. We think the earnings are going to be led typically by the sectors which would recover earlier in the economic cycle. We are overweight on cement and auto; that is where we think the recovery first will show through. We are underweight similarly on metals because we think there are too many global factors and it is something we do not want to really play on. It is not so much part of an India story, it is more a global story. Similarly, we are underweight to some extent on energy, linked to global factors. So I think that is where we are placed and we continue to advise people to play what we see as insipient signs of an economic recovery.

    ET Now: What would you be most weary of right now? One has seen year to date, how metals have been really the surprise mover even though maybe things on ground may not be quite supporting the way the stock prices have been moving. But just looking at the trend in the last couple of trading sessions as to how the market laggards or the ones dragging the market have been actually the metals, do you think that rally that we saw from at start of the year to about March, was rather short lived?

    Lalit Nambiar: One really needs to think about is what is driving those rallies in commodities and if it is not underlying demand and if it is some technical factor. If it is a change in protection structure, duty structure or if it is a change in perhaps conditions on the ground in China which are temporary, I think that is not a reason to buy stocks because then effectively what you are doing is really trading and a trading call is a difficult one because I do not think you can enduringly make money in those. It is for people who want to time these trades and is perhaps best left to them. If you really see something happening there and if you think China can avoid a hard landing and if you think the growth is going to pick up, genuine demand is going to pick up for spaces like metals, then you probably should go and look at buying them. Otherwise for us at least it is an avoid.

    ET Now: Let us talk about the overall situation in the FMCG space. Given the kind of competition that is heating with new entrants Patanjali and what it is doing to the overall demand scenario, what is that you would lean toward within this sector and how do you see demand and volumes shaping up?

    Lalit Nambiar: I think there are some incumbents who have created a disruption. I think a lot of the disruption is more in the mind, perhaps some segments have been affected more than others. So when one looks at categories like toothpaste, perhaps there could have been some impact on some of the new players. But I think you need to consider the overall demand scenario, that rural demand could look up once the monsoons come through as expected. So I think within the, space you probably want to look at companies which have strong brand equity which are less vulnerable to some of these disruptors. And I think that is where we will focus our investments.

    ET Now: In the two-wheeler space, while the monthly sales data was extremely impressive, we have got to two big giants from the two-wheeler space come out with their earnings. How are you tactically positioning yourselves within the two-wheeler space and do you even like the sector per se?

    Lalit Nambiar: Yes, I think a couple of those names, one especially, is looking reasonably good and we think that the monsoon factor will play, rural demand will play a role there and it is a reasonably good place to be.




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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