| Rate-sensitive sectors bound to benefit, say fund managers |
| Shilpa Johnson / Mumbai February 3, 2012, 12:15 IST |
The Reserve Bank of India, in its third quarter review, decided to boost liquidity by lowering the Cash Reserve Ratio (CRR) to help revive growth. The RBI cut the CRR by 50 bps to 5.5%. CRR cut will infuse Rs 32,000 crore into the system. However, repo and reverse repo were kept unchanged at 8.5% and 7.5%, respectively.
This week, high-beta ICICI Bank rallied after the bank beat estimates by reporting 20% year-on-year (y-o-y) growth in net profit at Rs 1,728 crore for the quarter ended December 2011.
These events have brought the rate-sensitive sectors back into the limelight.
The fund managers of Smart Portfolios’ Season 4 share their views.
For the week, Rikesh Parikh’s net worth stands at Rs 1,008,000, up 0.78 per cent; Ashish Mittal’s net worth is at Rs 995,000, down 0.52 per cent; Alex Mathews’ net worth is at Rs 1,046,000, up 4.63 per cent; and Ajay Parmar’s net worth totals Rs 1,085,000, up 8.47 per cent.
Rikesh Parikh, VP Equity Strategies, Motilal Oswal Securities
| RIKESH PARIKH, VP Equity Strategies, Motilal Oswal Securities | |||
| Top Holdings | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| Mcleod Russel India | 217.44 | 190.80 | 0.43 |
| Dena Bank | 76.10 | 71.45 | 0.43 |
| Oriental Bank of Commerce | 260.89 | 280.80 | 0.42 |
| Power Grid Corp | 101.93 | 105.10 | 0.32 |
| PTC India | 48.42 | 51.05 | 0.26 |
| Total investments | 2.75 | ||
| Cash | 7.33 | ||
| Net worth | 10.08 | ||
According to Parikh, even though ICICI Bank posted decent set of numbers, they are yet to recognize Nonperforming assets (NPA) of two critical a/c (GTL and 3i InfoTech), which he feels could increase their NPA provision in the fourth quarter.
He says," The stock has given a decent rise but I prefer a correction near 800 -825 level in order for me to enter the stock." He goes on to add, "With the RBI initiating monetary easing by way of cutting CRR by 50 bps, which was higher than our estimates, interest rate sensitives are bound to benefit."
Parikh has been overweight on banks and has recently included Mahindra & Mahindra in the portfolio.
Ashish Mittal, Fund Manager – PMS, Centrum Wealth
| ASHISH MITTAL, Centrum Wealth, Fund Manager- PMS | |||
| Top Holdings | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| MRF | 6816.10 | 8364.55 | 0.84 |
| Balmer Lawrie & Co | 618.48 | 539.70 | 0.72 |
| Karur Vysya Bank | 372.59 | 385.70 | 0.66 |
| EID Parry | 242.43 | 217.75 | 0.61 |
| Reliance Industries | 790.68 | 829.25 | 0.58 |
| Total investments | 9.24 | ||
| Cash | 0.71 | ||
| Net worth |
9.95 | ||
For quite some time now, Mittal has maintained his view that the interest rate cycle has peaked and could reverse in Jan-March 2012 quarter. “Food inflation has already turned negative and the manufacturing inflation is also expected to moderate in the wake of recent slowdown in domestic industrial economy. The recent action by RBI strengthens our view point," expressed Mittal.
According to Mittal, the RBI’s action boosts confidence in interest rate sensitive sectors like banking, auto and capital goods. “Our portfolio has maintained a healthy exposure to interest rate sensitives. We are now slowly turning aggressive and increasing our exposure to these sectors," he said.
Alex Mathews, Head (Technical and Derivatives Research), Geojit BNP Paribas Financial Services
| ALEX MATHEWS, Geojit BNP Paribas Financial Services Ltd, Head Technical and Derivatives Research | |||
| Top Holdings | Cost Price (Rs) | Current price (Rs) | Value (Rs lakh) |
| Infosys | 2752.97 | 2757.00 | 0.55 |
| Aptech | 90.68 | 92.70 | 0.46 |
| Tata Coffee | 881.50 | 853.85 | 0.43 |
| Reliance Industries | 811.52 | 829.25 | 0.42 |
| Amrutanjan Health Care | 795.99 | 789.95 | 0.40 |
| Total investments | 3.13 | ||
| Cash | 7.34 | ||
| Net worth | 10.46 | ||
"One major thing to note and one which surprised the street was that the provisioning expenses declined by 26.4% YoY to Rs 3.41 billion and the net NPA levels fell by 6.2%. The management had commented that they expect the retail business to show growth in coming quarters as well. Put all these together, I maintain 'HOLD' recommendation on ICICI Bank, for medium to long term," commented Mathews. He is planning to take position in ICICI Bank but will wait for correction.
Mathews expects good days ahead for rate sensitives as the rates are expected to come down in the near future and the infrastructure and real estate sector are expected to pick up. Commenting on his current portfolio he said, “I do not have anyone of them in my portfolio at this point in time." In Mathews’ opinion, the street is expecting much from the government in the Union budget and if they deliver, then he would add more to his portfolio, especially from the rate sensitive sectors.
Ajay Parmar, Co-Head Investment Banking, Emkay Global
| AJAY PARMAR, Co-Head- Investment Banking, Emkay Global | |||
