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“Markets are trading at forward PEx of 13x-14x”
Thu, Oct 03, 2013
Source : Shoaib Zaman, Citrus Interactive

Ravi Gopalakrishnan, Head Equities, Canara Robeco Asset Management shares his thoughts on markets, twin deficit and many more topics with Citrus Interactive.

Gopalakrishnan has more than two decades of experience. Prior to Canara Robeco he was with Pramerica Asset Managers.

1. What are your views on the twin deficit that India is facing?

India is facing the problem of twin deficit from quite some time and to fight the deficit problem government has taken several measures including rationalization of expenditure, controlling imports and promoting exports. Also the government and the RBI are looking at taking a number of steps to ensure adequate foreign investment inflows into the country to finance the current account deficit (CAD). The depreciated value of INR makes India’s exports competitive and if the economic growth picks up going ahead, government may be able to achieve its deficit target for the year.

2. Where do you see rupee in the next few months and especially by December? What is the value of rupee according to you?

The Indian Rupee depreciated to an all time low of 68.83/$ on 28th August 2013 on worries of rising CAD and the tapering of bond purchases by the U.S. Federal Reserve. The rupee had become extremely undervalued and subsequent to the steps taken by the RBI to enhance inflows into the country and the delay in the tapering of bond purchase program by the Federal Reserve, the rupee has managed to recover significantly and  has appreciated to 62/$ currently. We believe, the fair value of the rupee to be around Rs. 60/$ but given the volatile global environment the rupee may trade in a broad range of 58 to 65 Rs/$ in near term.

3. Where do you see the market moving in the next one year and three years? How much of downside/upside do you see?

Markets have been very volatile for quite some time but irrespective of the market volatility equity markets continue to provide selective long term value creation opportunities. While markets may continue to remain volatile, we believe valuations of certain stock and sectors have become quite attractive for long term investors. The markets are trading at forward PEx of 13x-14x and are reasonably valued and hence provides long term investors a good opportunity to invest in the markets through the SIP route and take advantage of the volatility.

4. Which sectors are you bullish and bearish on?

We are positive on the IT Services on the back of improving macro situation in the U.S. and Europe which is likely to benefit Indian IT companies and also from rupee depreciation. We are also over-weight Pharma & Healthcare sectors on back of the long term sector dynamics and rupee depreciation. We are under-weight Banking & Financials sector on the back of slow down in the economy and the elevated interest rate scenario which can impact the growth dynamics of the sector. We are under-weight Industrials and materials sector also.

5. What are your views on the fed tapering? Also there will be a new fed chairman from 2014. Do you expect the fed's policy handling can change dramatically because of that?

In the September 2013, FOMC meeting Fed left its USD 85 billion-a-month stimulus program unchanged on back of weak data coming out from US. The Fed Chairman commented that the tapering was not a preset course and that the eventual unwinding of stimulus will be largely dependent on the economic recovery in US. We think the QE tapering is an event that is likely to happen with US recovery though the timing remains uncertain. We do not see any dramatic change in Fed policy due to the change in the Chairmanship.

6. How would you categorize your products and what products are you recommending for investors? 

We offer a basket of products to our investor with Debt, Equity, Hybrid & Gold asset classes. All our products are distinct and cater to the different risk return profile of the investor. Based on their risk reward profile and investment horizon, investors can consider investing in these products. Investors with moderate risk appetite and investment horizon of 12 months or more can consider investing in to debt funds and debt focused hybrid funds while investors with a higher risk/return profile can consider equity mutual funds.

 
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