Betting on recovery in domestic demand: Pankaj Murarka

Which are your top bets?

We are betting on a recovery in domestic demand and are overweight on automobiles, especially passenger cars, on consumer durables and financial services. Among financials, we are most positive on private sector banks. We are also bullish on engineering and capital goods stocks, including select names in construction and infrastructure, on the back of a revival in the capex cycle.

Which sectors are you negative or underweight on?

We have reduced our exposure to consumer staples companies, as we expect slower revenue and profit growth for these. The other reason is their rich valuations, despite an apparent slowing in earnings growth in the past few years.

The earlier round of boom was led by construction, infrastructure, real estate, capital goods and power stocks. Which sectors are likely to be leaders this time?

Domestic manufacturing is a potential leader in the current rally. Manufacturing companies have taken the highest heat from the slowdown. We expect a rebound in manufacturing and will be especially strong in auto, auto ancillaries, consumer durables and capital goods.

How do you see information technology and pharmaceuticals?

We remain positive, as Indian companies still have a very low market share globally and top companies in these sectors are among some of the country's best, with a global presence.

Mid-cap stocks have been leaders in the recent rally. Do you still find these attractive?

Mid-caps will continue to out-perform large-cap stocks. Mid-cap stocks now account for about 20 per cent of the funds in Axis Equity Fund, our classic diversified equity fund. Their exposure was around nine per cent a year ago. However, you have to be stock-specific, given the wide variability in their financial profile and management quality.

Pankaj Murarka, Head of equity & fund manager, Axis Mutual Fund