With the market dynamics changing and quarterly results just round the corner, K Ramanathan, CIO, ING Investment Management tells Puneet Wadhwa about the sectors he think will perform well in the coming financial year. Excerpts:
What is your investment strategy given the current macro-economic fundamentals?
We expect GDP growth for 2010-11 to be 8.25-8.75 per cent, assuming a normal monsoon. Given the run-up un valuations (Sensex) at around 17 times, FY11 is not surely cheap. Valuations look fair if the market estimates of earnings growth, at around 25 per cent in FY11 and around 20 per cent in FY12, materialise. The scope for significant re-rating is low. We believe market returns will be in line with earnings growth. We are positive on two-wheelers and auto-ancillaries, besides the industrials segment, with an overweight on construction. Public sector banks should also perform well. We are overweight on pure refiners and underweight on FMGC and utilities.
Any scrips that you recommend in the mid-cap space?
There are stocks in several sectors that are trading at a 30-50 per cent discount to their large-cap peers. We believe these are attractive opportunities and expect this valuation gap to narrow. For instance, in the technology space, Infosys is trading at 21-22 times FY11 earnings, while NIIT Tech at 7-8 times FY11 earnings. A key risk to this expectation is global risk aversion that may create volatility in this space.
What returns do you expect from commodities such as gold in 2010? How do they compare with the returns in 2009?
Commodities like oil and gold had a fabulous 2009, with returns of 85 per cent and 25 per cent, respectively, the key reasons being the revival of growth and concerns over the dollar. Global uncertainties regarding Europe sovereign issues and high fiscal deficits of developed nations should be positive for gold in 2010.
