Ramanathan K, the chief investment officer-single manager of ING Investment Management, tells Puneet Wadhwa about market movements, global commodity prices and the sectors to invest in. Edited excerpts:
What is your investment strategy at current levels? Have you changed your year-end targets given the macro-level headwinds?
We expect the markets to bottom-out over the next few months. The impact of measures to control inflation is at least visible in the slowing growth numbers. This will albeit with a lag, result in inflation peaking out over the next three-six months. The slowing growth in China, India and the US should have a sobering impact on global commodity prices. Absence of quantitative easing-3 (QE3) would also result in reduction in speculative element in global commodity prices. All this should be positive for inflation and markets.
While we are currently overweight on consumer sectors and the information technology IT space, I feel it is time to have an active look at interest rate sensitives, which includes financials and industrials (capital goods and infrastructure).
These are sectors which have been beaten down by macro headwinds and offer value and potential for above market returns over the next one-two years.
How have you churned your portfolio in the last three months? What is the strategy for the next couple of quarters?
We continue to be overweight the consumer discretionary sector. We have reduced our overweight position in the IT sector and increased our exposure in the financials space (non-PSU banks). In line with our view, the risks to the market will bottom-out in the next few months and we would look to overweight interest rate-sensitives like banking and industrials.
Are there any sectors/themes/ stocks in the mid-cap basket where one can invest from a medium-term perspective?
Consumption would be an evergreen theme to invest in from a medium-term perspective. The demand in this space is typically less cyclical and is less sensitive to macro headwinds like inflation and interest rates.
The wholesale price index (WPI) rose an annual 9.06 per cent in May. Do you think monetary policy intervention has been unable to tame the spiralling inflation?
Monetary policy transmission takes time. The interest rate increases effected earlier are now having an impact as reflected in the slowdown in the index of industrial production (IIP) numbers and the GDP growth numbers. However, RBI has been behind the curve so far. Only in the last credit policy did it indicate further urgency to control inflation by increasing rates by 50 basis points (bps).
What is your take on corporate earnings? Could we see the downgrades happening in the coming quarters?
I see the bottoming-out of the earnings downgrades cycle in the current quarter.
What is your advice to retail investors in the current market conditions? Is it time to start bottom fishing?
The retail investors will be better off investing through mutual funds, which are low-cost vehicles managed by professional fund managers and are transparent and tax efficient. All of us by now know the value of SIPs that brings in the benefit of rupee cost averaging. From an equity view point, the investors should get ready for bottom fishing.
