With September quarter results out, Ramanathan K, CIO - Single Manager (Equity & Debt), ING Investment Management tells Puneet Wadhwa about the positive and negative and the investment strategies to adopt. Edited excerpts:
What is your investment strategy in the current market conditions? Do you think this is a ‘sell on rallies’ market?
We are currently defensively positioned, with our portfolios overweight on consumer discretionary, consumer staples and pharmaceutical sectors. We are underweight on financials, materials and industrials sector.
While market valuations are attractive compared to historical averages, issues that continue to impact markets are very many. On the domestic side the issues are high fiscal deficit, policy paralysis, high inflation, slowdown in growth, high current account deficit, depreciation rupee. On the global side, the issues in Europe are already well publicised.
Given the multitude of issues, with no clear sight of resolution, the probability of a significant rally in markets seems low. Albeit, these levels are attractive for investors with a long-term perspective.
How have you churned your portfolio in the last three months? What is the strategy for the next couple of quarters?
No, our portfolio positioning has not significantly changed over the past three months, though we have reduced our cash levels to some extent. We would continue to watch the factors mentioned above and look to change portfolio beta, depending on the outlook and progress of these factors.
How do you view the proposal to open the aviation and retailing sectors for foreign direct investment (FDI)?
What is your view on the September quarter results? Any positive or negatives surprises from India Inc in the recently concluded quarter? Do you see muted earnings growth for the next two quarters?
The September results, on an average, were disappointing for sectors like capital goods, metals, public sector banks and oil marketing companies. The biggest negative surprise came from the margin contraction for companies across the board . While some of this was expected by the market, the extent caught the investing community by surprise.
Are you seeing any shift in foreign institutional investors (FIIs) outlook towards India?
FIIs continue to be underweight on India, as returns for them have not only been impacted by poor returns in the market, but also significantly due to the depreciation in the rupee, which is almost equivalent to the fall in the market year-to-date.
How do you expect the rupee to pan out in the near-to-medium term? How do you see FIIs taking in the rupee movement?
The direction of the rupee depends on the Reserve Bank of India’s (RBI’s) measures and efforts to stem the fall of the rupee vis-a-vis the dollar. The recent measures like increase in debt limits to aid debt capital flows, increase in NRI deposit rate caps etc. are surely positive. However, with a continued high current account deficit, poor FII flows and global risk aversion the rupee will continue to be under pressure.
What is your expectation from the RBI’s policy review in December? Have the markets factored in the possibility of another rate increase?
I expect RBI to leave rates unchanged. Inflation should edge downwards starting December/January. There is clear evidence of domestic growth slowing. Global events post last policy action also support a soft stance from RBI. The markets are not expecting any rate hike in the December policy.