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Stock Analysis, IPO, Mutual Funds, Bonds & More

We’re overweight on auto, private sector financials & capital goods: Prasun Gajri

We are in a range-bound market as far as interest rates are concerned.

ET Now|
Updated: Jun 19, 2017, 03.25 PM IST
We are in a range-bound market as far as interest rates are concerned.
We are in a range-bound market as far as interest rates are concerned.
Prasun Gajri, CIO, HDFC Life Insurance Company, says GST and June quarter earnings will be key near-term triggers for the market. Excerpts from an interview with ETNow.

ET Now: While the market is still floating around lifetime highs, triggers are drying up. What would dictate the market mood from here?
Prasun Gajri:
The most imminent thing on the market’s mind is GST. How things really pan out in June quarter earnings would be the next trigger. But my basic belief is that we are in a little bit of consolidation mode at this point, and that is pretty healthy for the market. We do believe there are no significant triggers at this point. The market would wait if GST causes some disruption, which I do not think is going to be a long-term issue. The second issue is going to be the June quarter earnings. There is really nothing beyond that that the market is looking forward to.

ET Now: How are you positioning yourself in the market right now? What are the big overweights, what are the underweights and what are avoids?
Prasun Gajri:
Really no change in the view in last few months. We continue to be underweight on some of the global sectors, primarily IT and pharma. The overweight sectors have largely to do with the domestic economy; any change in the domestic economy or any reforms in the domestic economy: so pretty much automobiles, private sector financials, select capital goods. That stance is pretty much intact for quite some time now. So I do not think that is changing in a hurry.

ET Now: You are saying you do not expect interest rates to rise. Do you expect them to fall considering the inflation figures? How would you approach the rate-sensitives?
Prasun Gajri:
I do not see much change in the interest rates in the near term. I am not in the camp which believes RBI is going to really go ahead and cut rates in August. I think RBI will continue to wait and watch to see if the fall in CPI is temporary or whether this can sustain. And if RBI does not believe it can sustain, I do not think RBI will be in a mood to cut rates. Our view is that we are in a rangebound market as far as interest rates are concerned.

Having said that, we do not see any imminent sign of interest rates really moving up, so that remains positive for rate-sensitives. Lending rates will keep coming off slowly. We already see signs of that in a lot of areas and that is something which will continue to be positive for the rate-sensitive sectors. Overall, I think it is a rangebound market while the bond market will be in consolidation mode as well.

ET Now: What is a good thing to do if the market remains rangebound? Is it time to look at other asset classes?
Prasun Gajri:
Not really, not at all actually. This is a good time for people who have not really managed to invest in the equity market on time. We continue to be believers in the equity market from a medium-term point of view. If you compare it with asset classes, I continue to believe that equity will outperform other asset classes whichever way you look at it – be it in fixed income or real estate. It is difficult to really take a call on gold, but I do not believe the yellow metal is going to outperform in the medium term.

So equity will continue to be the preferred asset class as far as investments are concerned, even though it may not necessarily give you outsized returns in the short run, which one may be looking at. But the same really applies to the fixed income market as well. I think we are in a consolidation mode there as well. I continue to prefer equity as an allocation from a medium-term point of view.

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