Remain long on Asian markets including India: Medha Samant, Fidelity International

In a chat with ET Now, Medha Samant, Investment Director, Fidelity International, says continues to like private banks, consumer, auto and IT services companies. Edited excerpts

ET Now: We were just discussing as to how all asset classes seem to be behaving in a very different fashion. The global bond yields seem to be pricing in a completely catastrophic scenario, equities and gold markets clearly seem to be indicating something else. What is your opinion then, which way is the world economy headed?
Medha Samant: Well it is a very interesting time right now. What we saw post Brexit was definitely more of a risk off sentiment coming in, then over the weekend we have seen a lot of political uncertainty in markets such as the UK, Japan, Australia get a lot more clarity and we have started seeing markets coming back and these markets have rebounded. So there is again risk on.

We believe in the short term there will be some amount of volatility that will be present because there are still questions about the wider implications of the Brexit vote on the global economy and what it means for the currency markets. But where we sit in Asia, we think long-term investors will remain focussed on domestic oriented economies like China, India, Indonesia, Philippines. So it is really important to focus on what is happening domestically. Domestic news flow and the fact that investors seem to be confident that central banks across the world will unleash some kind of stimulus is what we are seeing in the markets right now. At the margin, our fund managers might have made a few changes to their portfolios but we remained invested and made no big changes to our positioning. So we still like the four areas that I have mentioned.
ET Now: So what does one do in this kind of confused global environment because you have to either associate with bond markets or with equity markets, I mean you cannot have a view that world is going to end and keep on buying stocks?

Medha Samant: From equity perspective, as I said, we remain quite confident about the prospects for Asia, so we remain invested in our portfolio. We have not seen any changes to our cash holding and we remain long on markets such as China, India, Indonesia, Philippines where we have seen long-term structural changes coming through. Now what is happening is through this period of volatility, our fund managers have been looking at Asian companies which will benefit, whose fundamentals will benefit from reforms on the ground irrespective of what is happening on the global macro front so that earnings are not likely to get impacted.

Yes it is a very difficult scenario in terms of asset allocation but from an equities perspective, some flagship products have seen net AUM inflows coming in.
ET Now: I do not know how closely you looked at India recently but there is a spate of reforms that are happening, small and big. While we are all awaiting for the headline GST, there have been a number of small ticket reforms that have been done. Today the oil companies have gotten the nod to increase kerosene prices by 25 paise every month till April 2017 as well. These were hitherto, unnoticed, unheard of. Do you think all of this raises the relative attractiveness of India as a market?

Medha Samant: Well it is interesting you bring that up because what we have been saying about India on the reforms front is that it is not going to be big bang, it will be about mini changes or mini reforms and that is exactly what is happening. Now when you look at investor positioning, the key overweight trade over the last 18 to 24 months has been an overweight to India in regional or global portfolios and that has remained. We still think that India is one of the most defensive stories from global perspective and it is also supported by a very strong domestic story. Now in the short term, a sentiment boost would be the likely passage of the GST bill in the upcoming parliamentary session but I think what is more important is how this earning cycle pans out and what the progress of the monsoon. That is what we are focussing on and we have remained invested in companies with a quality bias, so those private sector banks that you were earlier discussing. We like some of the consumer names, some of the auto names which we think will be beneficiaries if the GST bill is passed through and selectively we have been looking at some of the IT services models as well.