Navigating #LokSabhaElections2019 with Jinesh Gopani

OutlookIndia

In this Q&A with Outlook Business, Jinesh Gopani of Axis Mutual Fund talks about the current market, where he sees pockets of value, the impact of Elections 2019 and the sectors most at risk in case of a correction. For investing insights, follow @outlookbusiness and log on to www.outlookbusiness.com  #Business #JineshGopani #LokSabhaElections2019 #LSElections #OutlookBusiness #OutlookMagazine #OutlookGroup

Transcript

00:00 Fundamentally, if you really see economic growth has been slow than what it was 6 months

00:13 back and even if you see the festive season has not been great, all the high frequency

00:18 data are not that good as you would expect in the GDP growth scenario of 7%.

00:27 So fundamentally I think things are slow, macro is bit weak and that is precisely now also

00:33 getting elevated in terms of risk because of the oil prices.

00:37 So oil price beyond 74-75 dollars is a big risk to the Indian economy.

00:43 So be it current account deficit or fiscal deficit concerns will come back.

00:47 So to that extent I think we are in that choppy waters where fundamental macro scenario doesn't

00:54 look that great and its impact will be seen in the micro which is the corporate earnings.

01:00 We are already seeing when we are doing the channel checks, the mid cap and the small

01:07 cap side will face pressure on earnings or on growth whereas large cap will still sail

01:13 through.

01:14 So fundamentally speaking things are weak and maybe it is because of pre-election thing,

01:20 things are slow so if you take two wheeler sales, car sales, tractor sales, CV sales,

01:26 all high frequency data are not pointing out to a good growth number.

01:32 Having said that once the government comes into, whichever government comes in, we will

01:35 have to see how the reform process is taken and hope that in next 2-3 quarters we will

01:40 have fundamentals coming back to its normal level of growth.

01:46 We are finding pockets of value in auto sector, maybe it might take 2-3 quarters for numbers

01:54 to come but obviously there is good value emerging in auto sector, autos and auto ancillaries.

02:03 Financial as I said always is a good evergreen story and some correction is always good for

02:09 stocks to enter.

02:12 Even again maybe 10-15% correction I think there is a good value emerging.

02:17 Capital goods also remains a pretty value pick but at this juncture we would like to

02:22 wait for the reform story to take shape in the infrastructure sector and let's say

02:28 if there are big orders which are being announced by the government for infrastructure then

02:32 obviously there is a good value in the capital goods side.

02:36 Pharma looks interesting with a 3 year view, again there is a value emerging but it will

02:42 take some time to show in terms of numbers.

02:46 So these are some of the sectors where we are working hard in terms of getting some

02:51 stock from an investment perspective.

02:57 Market perspective whatever has happened in last 6-7 months in terms of economic growth,

03:02 in terms of some kind of slowdown in economy because of the issues around the oil and FAS

03:08 and all those things I think and the issues around job growth and other factors.

03:16 Generally speaking the markets are discounting a good number for this government and at this

03:25 juncture it is like this government will come back to power which we are also hopeful and

03:31 so at this juncture this is what the market is discounting and hence we have a rally in

03:36 March and April.

03:39 However if things, elections are elections so if things change and if the outcome is

03:44 unfavourable then obviously you will have a bigger cut in the market.

03:50 Let's say if this government doesn't come back to power.

03:53 Lesser seats then what the market is expecting for the current government, we will have to

03:58 see how the coalition is formed, how the cabinet is formed, what kind of reform process they

04:04 take or what kind of published measures they start after forming the government.

04:08 At this juncture it is like the current government coming back to power with a decent majority.

04:17 Market meltdown if it is because of domestic factors, let's say election, let's say just

04:21 a case in point then obviously domestic led sectors which are financials, consumption,

04:29 again auto will have a bigger hit and more hit on the mid cap and the small cap side

04:35 because in any which ways they are more vulnerable if the slowdown comes.

04:40 If market meltdown is because of a global financial crisis or US led slowdown then I

04:47 think it will be very very stock specific, maybe some bit of technology stocks might

04:55 get hit but the direct impact will be minimal.

05:00 So to that extent maybe IT would be a sector which will take a hit if there is a global

05:05 slowdown and some auto stocks which are more overseas dominated.

05:11 So some of the auto ancillary companies who are exporting more or some of the auto ancillary

05:16 companies who have factories outside India, they would be more vulnerable to this shock.

05:21 So then it will be more of a 5-10% of the market not the entire market but if there

05:26 is a domestic meltdown for whatever reason then I think the entire, all the domestic

05:30 led sectors will have its own problem.

05:32 [Music]

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