I V Subramanium of Quantum AMC says that in terms of earnings outlook, they really don't focus on quarterly numbers. He adds that they are still quite happy looking at the long-term, which seems to be quite reasonable at this point in time assuming that the GDP growth continues to be robust.
Subramanium adds that if one is a long-term investor, their advice to him and to all retail investors is to stay put in equities as they still look like a very attractive asset class.
According to him, for a longer-term, on a yearly basis, both the IT segment as well as the automobile segment could throw up some surprising numbers.
Excerpts from CNBC-TV18's exclusive interview with IV Subramanium of Quantum AMC:
How have you read the way the market has moved this month and what are you expecting before we hit the earnings season?
This month I think the fund flow has been quite reasonable, not just this month, but for the past couple of months.
That has added some strength to the market, but if I go deeper into the Sensex again, I find that there are few stocks, which seem to have had a bigger impact on the Sensex as a number to look at.
I didn't see all the stocks moving up, but some of them have had a more significant effect on the market. In terms of earnings outlook, really we don't focus on quarterly numbers. We are still quite happy looking at the long-term, which seems to be quite reasonable at this point in time assuming that the GDP growth continues to be robust.
We recently had an interaction with some of the international clients who come to Mumbai and come to meet us at our offices. What I find is that while the long-term investors are still very positive, they seem to be a bit worried about the valuations, particularly when they look
at other options available for them globally.
I think to that extent, the long-term investors may want to take a re-look at India and wait for the earnings to catch up or for the market to decline a bit.
How do you think they will play it then, tactically, will they just take some profits off the table, sit on more cash or do you think there will actually be funds flowing out and going into another asset class as it might be?
Some of the long-term investors may not actually take the money out of India, but they may make their portfolios a bit defensive. But clearly in terms of fresh allocation, they may postpone it. They are taking a 20-30 years view on India and they may want to postpone the fresh allocation to India.
At this point, at least the long-term investors have not indicated that they want to take the money out of India. But in terms of the hedge funds or the short-term players, it is quite difficult to take a call at this point in time.
Where exactly do you think they are likely to sell most, or what would your advice be to them?
If one is a long-term investor, our advice to him and to all the retail investors is to stay put in equities, they still look like a very attractive asset class and one must leave it to the particular fund house or fund manager to decide where exactly to invest.
But from our portfolio that is Quantum Mutual Fund portfolio side, we still find the building materials and some of the FMCG stocks a way bit out of our reach. Barring these two sectors, our exposure in the other sectors continues to be reasonably good and we are quite happy holding those stocks.
How would you play the metals counter at this juncture, there were some jitters on the base metals front and yet the LME prices have not fallen really sharply, not even a 10%
Our comfort level with the steel stocks is reasonably high, we are quite happy holding on to the steel stocks, which we have. Aluminum is something, in which we are beginning to see a little attractiveness in these stocks.
But we are still waiting for some more price correction or better opportunity, before we invest in these stocks. We feel that the steel story is a lot more sustainable and whatever stocks we hold right now, we are quite comfortable with them.
What is the call on oil now, both upstream and downstream?
Again from my mutual fund point of view, our exposure to that segment is reasonably high. We hold stocks like BPCL and HPCL. The declining oil price was actually helpful for them, but for us really the call is more on the long-term basis and we feel that prices and the rationality should prevail in that segment.
As the subsidy elements and issues related to those points are removed, these stocks may look attractive in the long run. Also we found a lot of value in these stocks in terms of whether one looks at the replacement value or any other parameters, while there are some near-term issues with these stocks, on a longer-term basis, I think they have a decent potential.
As a fund, are you sitting on a greater percentage of cash though?
We were around 18% cash at the end of last month and we continue to be near that amount as cash.
Reliance Energy stock has been up and about, it's not of course one of the most voluminously traded stocks in the Sensex or the Nifty, but today it's nearly 4% higher, is there any explanation for this or is it just a part of this huge interest that we are seeing in the power sector?
On this particular stock or why it's up today, I don't have much clue. But as a sector, we find it very attractive when one looks at the long-term needs of India. While we don't own Reliance Energy, we almost have NTPC and Tata Power as other stocks in the portfolio.
We have seen bits and pieces of either an expansion or a molecule or an acquisition news coming from the pharma space, do you like that space and if you do, what are the gems that you would look out for?
We definitely like the space a lot but having said that, it is somewhat risky in the sense it is quite difficult to make predictions on which molecules may do well and what research efforts will pay off in the long run.
So one has to assume some probabilities to whatever these companies are doing in terms of research. But in terms of addressing the various markets available both domestically and internationally, some of the Indian companies definitely look very attractive if one has a long-term investment horizon.
From our mutual fund portfolio point of view again, we have an exposure to domestic companies like Ranbaxy and Dr Reddy's. We also have an exposure to some of the MNC stocks, which we feel over the long-term, will not only deliver good margins, but will also address the Indian markets, which increasingly look attractive for some of these MNCs.
In terms of earnings when you step into it, what do you think will be a surprise on the positive side?
If you are asking me for this quarter, I have no comments to make. But if it is on a longer-term, on a yearly basis I think both the IT segment as well as the automobile segment could throw up some surprising numbers.
