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    Consumer durables is our favourite monsoon theme: Ganeshram Jayaraman, SPARK Capital Advisor

    Synopsis

    We have still stayed away from the PSU pack. Yes there has been one big rally which has happened in the last three months which we have been happy to let pass because we still believe that the challenges are there in terms of asset quality, capital issues as well as people issues

    ET Now
    In a chat with ET Now, Ganeshram Jayaraman, SPARK Capital Advisor, says will possibly wait for that or some more signs before we get to see PSU banks or other private sector banks. Edited excerpts


    ET Now: Let us understand the connection here. Good monsoon means more demand for agri, autos and FMCG. Is that the theme at the conference?

    Ganeshram Jayaraman:
    Yes, I think the conference is more specifically focused on the entire industrials, infrastructure, utilities and consumer durables related items around it. We are having about 30 odd managements and across these sectors will be presenting their views. We are more interested in understanding how they are seeing on the ground reality of government spend showing up both at the centre and at the state levels.

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    At the centre, it has been showing up for the last 12 months. Our view is that state government spend is likely to pick up this year. So, we will be very keen to figure out at the conference, what managements have to say on the changes happening there lately, their interactions with state governments, where they are looking to spend and that will have a big bearing on how we see the likely second half earnings likely to take shape.

    ET Now: So what is the top theme? I look at the theme showcase --building materials, consumer durables, capital goods and infra. Surely, that’s a lot of monsoon beneficiaries. But you guys at SPARK have a favourite theme as well, I am guessing. What is your favourite monsoon theme?

    Ganeshram Jayaraman:
    Yes. Clearly consumer durables is what we like. A lot of the names around it. What we mean by durables is more discretionary spend. It includes even two-wheelers, air conditioning companies or companies surrounding the whole building materials theme as well. So clearly that is where we are looking to pick ideas, figure out what the managements have to say on the likely evolving scenario on the ground.

    ET Now: No surprise that you are underweight on IT, pharma and oil and gas, particularly IT. Given the nature of discussion that we are having this morning, let us talk about your overweight position on private banks and how do you extend that position to PSU banks because a large part of the consumption story also comes in from rural demand for loans and that being dependent on PSU banks and a lot of the NBFCs as well servicing the market. So what is your overall view there?

    Ganeshram Jayaraman:
    We have still stayed away from the PSU pack. Yes there has been one big rally which has happened in the last three months which we have been happy to let pass because we still believe that the challenges are there in terms of asset quality, capital issues as well as people issues. In the next two years, a large portion of the senior management, the DGMs and the GMs are likely to retire. So the impact of that will be seen. So, it is more of a structural call here still in terms of how we see that play and more importantly what we believe is both some private sector banks as well as the PSU banks.

    We need to see the private sector capex beginning to take shape and till then we do not see them benefiting materially in terms of growth or asset quality. So possibly, this conference will also help us understand how far we are from before we get to see private sector capex play. We have seen government sector capex and private sector increased industrial activity or more capacity utilisations improve but we still believe that we are 24 months away before we get to see private sector capex get planned or beginning to show up as order wins.
    We will possibly wait for that or some more signs before we get to see PSU banks or other private sector banks or more aligned to private sector capex before we get to see that.



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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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