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| Market Voice: Prateek Agrawal | | 'Commodities will drive earnings' |
| Puneet Wadhwa / New Delhi Jul 13, 2010, 00:07 IST |
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 With broader indices bearing the brunt of volatility, Prateek Agrawal, head (equity), Bharti AXA Investment Managers, tells Puneet Wadhwa that certain mid-cap stocks with attractive valuations can save the day for investors. Excerpts:
Given the overall economic scenario, what is your investment strategy at the current levels?
With the global economic outlook looking a bit challenging, and valuations of the indices in India at the top end of the fair range, we believe the outlook on various counts should improve. We have framed our strategy accordingly.
We continue to be positive on the Indian consumption theme on our assumption of continued availability of cheap credit, buoyant economy and strong job market. We also believe auto is a good way of playing the consumption theme.
Do you prefer investing in mid-caps at this juncture, given the volatility in the broader indices?
We believe valuation comfort outside the index is higher than in the index and increases as we move away from the large-cap space. The space also offers good operating leverage and has generated profit growth stronger than the index over the last two quarters.
However, the mid-cap space suffers from low liquidity. Since it has a lower degree of institutional participation, it may tend to be affected more by policy measures like imposition of capital gains tax, as being proposed in the Direct Taxes Code.
Hence, while we have exposure to mid-caps, it is only into companies that are showing strong growth and offering compelling value. Overall, we have reduced our exposure to mid-caps.
What are your expectations of the India Inc earnings in the June quarter?
We believe that the earnings season will be strong on a year-on-year basis almost across the board. Sectors like steel, while delivering strong growth on a year-on-year basis, could disappoint. The commodity segment will drive earnings.
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