Amidst the ongoing recession and the spectre of deflation, mutual fund houses are trying to identify potential sectors to invest in. Asset management companies are looking at sectors which can sustain growth momentum and emerge as key drivers in the next market recovery. These sectors include FMCG, banking, healthcare, pharmaceuticals, oil and gas, infrastructure, capital goods, cement and automobile.“The boost to rural economy due to rise in food grain prices and higher disposable incomes in the hands of government employees (which has come through 6th Pay Commission) will trigger domestic consumption. This has made us overweight on FMCG and health care sectors for our equity schemes,” said Sankaran Naren, CIO, Equity, ICICI Prudential AMC.
The outlook on these two sectors is that both are cash flow generating with ability to fund there business requirements and also largely higher demand driven. On similar lines, the pharma is expected to gain from being a necessity driven sector. There is big opportunity for generic companies as drugs worth $70 billion are expected to go off patent between FY10 and FY12 and India offers low cost manufacturing base for generic.
Further, increase in domestic sales has also improved sentiment for the automobile industry too. Passenger cars sales rose 4.7% in February 2009 and commercial vehicles grew by 34% during the month.
“The year ahead, will be one for value investing. We will look at sector specific stocks based on three parameters: share price below book value, price to earnings ratio, and attractive dividend yields,” said Sanjay Sinha, chief executive officer, DBS Cholamandalam MF.
Sahara Mutual expects year on year growth of 6-8% in cement, 15-20% in power and related industries and 10-15% in engineering. “Order book position of the companies in these industries for the next 2.5 to 3.5 years is strong enough,” said N K Garg, CEO, Sahara Mutual Fund.
Cholamandalam’s Sinha said, “Economy is projected to grow by 6%. This implies a credit growth of 15-18%. Indian banking sector is strong and vibrant as it is not directly impacted by the global financial meltdown.”
Valuations are also at steep discount to book values in case of public sector banks and have significantly moderated for private banks. However, fund houses are currently reviewing their outlook on banking in view of the large increase in G-sec yields and NPA scenario.
In another development, Tata Mutual Fund, which plans to allocate 20 per cent weightage to growth sectors in the coming two three years, is mulling launch of an international fund to focus on promising sectors in emerging economies.
Said Ved Prakash Chaturvedi, managing director, Tata Asset Management, “We have plans to explore emerging markets like China. I expect the investment climate to improve in 2-3 years time. In between, we must tap the growing sectors to ensure substantial return.”
Sahara Mutual expects year on year growth of 6-8% in cement, 15-20% in power and related industries and 10-15% in engineering. “Order book position of the companies in these industries for the next 2.5 to 3.5 years is strong enough,” said N K Garg, CEO, Sahara Mutual Fund.
Cholamandalam’s Sinha said, “Economy is projected to grow by 6%. This implies a credit growth of 15-18%. Indian banking sector is strong and vibrant as it is not directly impacted by the global financial meltdown.”
Valuations are also at steep discount to book values in case of public sector banks and have significantly moderated for private banks. However, fund houses are currently reviewing their outlook on banking in view of the large increase in G-sec yields and NPA scenario.
In another development, Tata Mutual Fund, which plans to allocate 20 per cent weightage to growth sectors in the coming two three years, is mulling launch of an international fund to focus on promising sectors in emerging economies.
Said Ved Prakash Chaturvedi, managing director, Tata Asset Management, “We have plans to explore emerging markets like China. I expect the investment climate to improve in 2-3 years time. In between, we must tap the growing sectors to ensure substantial return.”
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