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Why Sonam Udasi is not afraid of oil rally

Global investors are not looking at India that keenly right now, says the Tata MF fund manager.

ET Now|
Last Updated: May 09, 2018, 02.57 PM IST
In an interview with ET Now, Sonam Udasi, fund manager, Tata Mutual Fund, says looking for opportunities in consumer and banking sectors.

Edited excerpts:

Good news in terms of micros, not so good news in terms of macros maybe; that’s how you can sum up the Indian equity market story at this point of time. Add to that all the noise over elections and factors emanating from global risks, how exactly are you viewing the markets at the current juncture?

Our job is quite simple. Look at the numbers on your own P&L of the companies you are invested in and as fund managers, you cannot take a call on what is happening in politics or when something will happen in the US. We continue to focus on the earnings on the ground and if things are improving, several segments will continue to show improvement and that is where we are putting our money in.

What do you make of the Q4 numbers so far? We have had banking names running into trouble when it comes to their Q4 numbers but again the promise of what lies ahead is something that has actually caused all these stocks to rise up. IT also has given a positive surprise. How are you assessing the Q4 numbers so far?

For IT, it is the midcaps that are doing far better than the large-cap stocks. The guidances from the top four are nothing great to talk about. The only saving grace for the sector is that most of the companies have 8% to 10% of market cap as cash. That offers a cushion for buybacks and dividends; but beyond that, there is nothing incrementally very exciting.

In terms of pure corporate banks, some bit of stress is now out in the open and that is giving the market hope that things will ease out and become better. Our own sense is, it will take some more time. There will be few management changes as well in the top corporate banks. We are waiting and watching. Incrementally, it should be better, but we have time.

How much of your focus would be on oil prices because almost 60% of Nifty companies look at oil as a key component that directly or indirectly impacts their earnings. From a fund manager perspective, you may not be looking as much at global factors but oil is something that would directly impact such companies. What is your view?

You are right. Oil is the black card right now. That said, I have seen that oil going up perversely is very good for inflationary sectors like consumer and the pricing power comes back to the banking sector. So, as a fund manager, I am looking at oil price rise a little more positively.

While it is not so great for some of the segments, but for the economy, it is generally great from a pricing perspective. In line with that logic, we are looking at opportunities there. Of course, there is the problem of the fisc, but anyway I do not think global investors are looking at India that keenly right now. They are anyway negative, it is only the domestics that have a view on India currently.

Our own view is even if oil goes up $75-80, there will be enough pockets to park our money incrementally and generate a better return. The consumer companies’ pricing power will continue to be good, the banking pricing power will come back and hopefully some of this will figure in their credit growth etc.

In that sense, we are not too worried about oil really.

You mentioned that there are a lot of sectors where you expect earnings return; there are some sectors which would still be a little flaky. What are the sectors that look exciting to you?

We are encouraged by the auto numbers that have come out across segments. We are also encouraged by the fact that some of the consumer names have declared good numbers. Today, two numbers came out and more will follow. As long as there is bottom-up consumption and volume growth is coming back, those are encouraging signs for a large country like India.

On balance, India has largely been an inward looking economy and if those sectors start doing well, you will find pockets where wealth can multiply over a period of time.

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