| 'Be stock-specific, expect moderate returns in 2010' |
| Rex Cano / Mumbai February 15, 2010, 0:08 IST |
In a new series of interviews, Ajay Parmar talks to Rex Cano about the outlook for 2010, review of corporate earnings, upcoming Union Budget and his approach to investments. During the week, Ajay Parmar’s portfolio saw gains of 2.29 per cent to Rs 12.04 lakh. The Smart Portfolios benchmark also appreciated by 2.48 per cent from Rs 10.48 lakh to Rs 10.74 lakh. Other fund managers performed in line with the benchmark, with gains in the range of 2-3 per cent each.
What is you outlook on the market?
Tightening in China, higher inflation numbers and fresh worries from European countries have resulted in a correction. We are down almost 12 per cent in last one month, a little higher than Hong Kong and Taiwan (11 per cent each) and a little lower than Brazil (13 per cent). I believe that valuations are fairly priced and we do not expect to see any big surprise in earnings.
However, we have to note that the significant part of the rally in India was driven by foreign inflows and hence any withdrawal by FIIs would certainly put pressure on the domestic market. I believe that governments across the globe have become more proactive and are capable of tackling the sovereign debt probelm. I do not see the market going down significantly and expect it to consolidate in a narrow range. 2010 will require investors to be more stock specific and Sensex may not be a good indicator for judging the performance of the portfolio. After a significant run up in the year 2009, expect a moderate return in 2010.
What’s your view on corporate earnings?
The corporate earnings for Q3FY10 were a mix of positive and negative surprises. However, overall the numbers were better than expected. We had expected a PAT growth of 21.9 per cent for the Emkay universe (145 companies from large and mid-cap space) while the actual performance came out much better at 29.1 per cent. Even on a sequential basis, the profit growth was at 8.6 per cent - better than our prediction of 1.6 per cent.
So far, corporates have shown better returns on the back of fiscal stimulus, lower raw material prices and lower interest rates. The real test for the corporates will come when these advantages will not be available. However, we have to note that there is adequate liquidity in the market and the demand situation is improving. For FY11, we expect the PAT to grow by 18 per cent for the Emkay universe.
What are the expectations of the Budget?
The forthcoming budget would try to withdraw fiscal stimulus in phased manner starting with a 2 per cent rollback of excise duty. The macro issues it will try to address will be to curb the fiscal deficit, create a road map for the introduction of the GST, look at further reforms for the oil and gas sector and chalk out steps to improve the capital inflows through FDI/FII route.
Overall the Budget will try to target a robust GDP growth with an eye on inflation and fiscal deficit. Apart from this, there will be populist announcements in segments such as agriculture, education, healthcare and rural development. Expect some more announcements to boost investments in the infrastructure space. Any bold steps taken by the government will be welcomed as political willingness is not an issue and this is just the second budget for UPA.
From a portfolio perspective, how would you balance sector exposure?
As I mentioned earlier, the portfolio strategy should be stock-specific and not sector specific. My sectoral preference will be pharma, IT, two wheelers, agri-inputs and infrastructure. I would also look at select stocks in capital goods, engineering, metals and banking.
What are the factors investors should bear in mind before investing?
First, one should have an investment objective. Second, create a disciplined approach. This will help maintain effective risk control. Third, be indifferent to your exposures. The objective in investments is to make money and not get married to scrips. Fourth, one should keep on booking profits at regular intervals. Fifth, there is no alternative to hard work and hence, one needs to keep on monitoring and analysing the portfolio for news or events that can impact the sector/stock.
| AMAR AMBANI Vice President (Research), India Infoline | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| Titagarh Wagons | 9.01 | 422.98 | 463.95 | 1.11 |
| Orbit Corp | 4.47 | 285.02 | 262.80 | 0.55 |
| Titan | 4.22 | 1686.40 | 1737.20 | 0.52 |
| Surya Roshni | 4.15 | 71.00 | 73.20 | 0.51 |
| Asian Paints | 3.93 | 1960.00 | 1944.75 | 0.49 |
| Total investments | 59.06 | - | - | 7.30 |
| Cash | 40.94 | - | - | 5.06 |
| Net worth | - | - | - | 12.36 |
| Returns (%) | 23.58 | - | - | - |
| PHANI SEKHAR Fund Manager – PMS, Angel Broking | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| eClerx | 11.98 | 344.25 | 452.10 | 1.27 |
| Federal Bank | 10.19 | 244.54 | 250.40 | 1.08 |
| Axis Bank | 9.78 | 901.30 | 1033.20 | 1.03 |
| Reliance Infra | 9.06 | 1183.00 | 1063.50 | 0.96 |
| Reliance | 9.03 | 1046.93 | 1015.15 | 0.95 |
| Total investments | 100.00 | - | - | 10.57 |
| Cash | 0.00 | - | - | 0.00 |
| Net worth | - | - | - | 10.57 |
| Returns (%) | 5.69 | - | - | - |
| AJAY PARMAR Head Research Institutional Equities, Emkay | ||||
| Top Holdings | % of assets | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| Sesa Goa | 8.74 | 365.53 | 382.70 | 1.05 |
| Bhushan Steel | 5.29 | 1564.00 | ||
