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00:00Hello and welcome. You're watching The Money Show. I'm Kavata Thaplial and this is a show
00:08which is one-stop destination for your personal finance queries. Anything you want, an investment
00:14strategy for any financial goal or even advice on your insurance policies, this is the place
00:20where you need to send across your queries and our experts will not only answer them
00:24live but also tell you how to align your financial portfolio with your financial goals. Just in case
00:30you have any query, you can send across your questions on our WhatsApp number and our email
00:36ID and do mention the existing strategies for your financial goals that so far wherever you've
00:44invested and what is going to be your investment trajectory so that it helps our experts to
00:51formalize a strategy for you. All right, so it's Navratri and also GST Bachat Utsaf kicking
00:58in from today onwards and it's time to get your portfolio strategies also checked and in fact
01:05festival strategies. I should say that I am joined by Vinay Pahadia, Chief Investment Officer,
01:10PGM India Mutual Fund. Vinay, hi, good evening and welcome to The Money Show and happy Navratri
01:15to you and happy GST Bachat Utsaf as well. And, you know, as P.A. Modi also was mentioning
01:22that it's not only chips and ships that should be made in India but now it is the GST reform that
01:28the world will witness and the theme from Capix to consumption and the way it will play out. This
01:34is the first step, you know, one more step. In fact, I should say that we are taking the direction
01:39of Aakman Irma Bharat. So, yeah, let's talk about, let's begin the conversation with this entire
01:45GST Bachat Utsaf and the benefits that we'll be seeing rolling out maybe in the third or the fourth
01:50quarter. Vinay.
01:52Hi, Kavita. Good evening to you and all your viewers and of course, good wishes for the Navratri season.
02:02So, I think I agree that there has been a massive stimulus given by the government of India via this
02:13GST budget or the reduction in GST and this is likely to kickstart the consumption weakness which means
02:26it's expected to reverse some bit of weakness which we were seeing in the consumption demand over the
02:32last six to eight months. So, I think it's a fairly strong and a material stimulus given by the
02:38government and this is likely to remain on a sustainable, as a sustainable stimulus and hence
02:44this is likely to result in good volume growth across the length and breadth of consumer discretionary
02:52companies as we see it today. So, Vinay, let's talk about the market and the way market has been
02:59playing out a lot of news. So, GST, it's already factored in to a larger extent. Last week, we saw
03:06that market showed us some resilience also. We did see, you know, certain amount of profit booking
03:11last week but then again, you know, you talk about India-US trade talks, you talk about GST reforms
03:19kicking in. A lot of things have been factored in already in the market. Now, do you agree with the fact
03:24the undertone still is bullish as far as the market sentiments are concerned?
03:31So, Kavita, sentiment is very, very bullish as we can clearly see across different asset classes in
03:37India. We are generally, investors are fairly bullish. So, if we look at most of the fund flows,
03:45the domestic flows remain extremely positive but there is a reduction in flows from foreign investors, there's a
03:55reduction in flows from a lot of the private equity investors, strategic investors and we are seeing some
04:03bit of promoter sales as well. So, in terms of fund flows, clearly there is a lot of optimism which is visible
04:09in retail. But I think we also need to remember that while we have talked about some of the key stimulus, so we have
04:17just talked about the GST stimulus, but there also was the income tax reduction which was a material stimulus
04:25given by the government. There has been a monetary stimulus in the form of reduction in interest rates
04:31and there has been a monetary stimulus in the form of increased liquidity due to reduction in the CRR. So, these are
04:40material sort of stimulus given by both the monetary and fiscal authorities. And we also need to remember that
04:47there is one more bit of mini stimulus which is likely to come in in the next one year's time in the form of
04:54implementation of the 8th Pay Commission which is once again likely to result in a significant hike for the
05:00central government employees and they will also start getting their arrears and hence that should also help
05:07arrest some of the weakness in consumer environment which we were seeing. So, I think generally the
05:14stimuluses which we are seeing in terms of both monetary and fiscal stimulus should help reverse the course of
05:21macro weakness which we were seeing since the last one year's timeframe.
05:26All right. Let's talk about...
05:28I think having said that, we need to also remember, I think as you correctly highlighted, there have been other headwinds.
05:34The predominant headwind amongst them is the tariffs imposed by the United States on India.
05:41So, at this point of time, there is a significant increase in tariffs which has resulted in a significant
05:49drop in the trade which we are doing with U.S.
05:53and if these sustain for the next one year's time, it could have a 60 to 80 BIPs impact on the GDP and that's pretty material.
06:02So, I think a quick resolution of these tariffs is extremely important for sustainability of growth for macro or for India.
06:14All right. Now, I want to understand your sector, please. How much of a consumption basket you think is still left to play out?
06:21You know, we are looking at autos gaining momentum and a lot of interest coming up over there.
06:26Apart from consumption, there's one defense sector also which is doing very good. PSU banks are on fire.
06:31So, what is your take in terms of sectors across market caps?
06:40Sure. So, I think consumer discretionary is a very important sector where we are materially positive across most of our funds.
06:51So, and that's been a long-term positive view simply because India is a growth economy and we are clearly seeing a very strong improvement in volume growth across consumption categories, especially on the consumer discretionary categories.
07:09And hence, we are fairly optimistic in that. But some of the other sectors which are in a structural growth stance include the healthcare sector, which includes the services and pharmaceutical businesses.
07:23We like a lot of the larger private sector, where we think they are potentially poised to capture the same India growth story, which is like funding the consumer discretionary expenditure for retail investors, for retail consumers.
07:40And we also like the telecom sector, where we think the valuations are fair and the growth is likely to be reasonably good, driven by increased consumption of data across the length and breadth of the country.
07:54So, these are some of the sectors where we are reasonably positive.
07:57I also want to understand sectors where, you know, you think the valuations are really high and you might not want to pick up those sectors.
08:06And also, in fact, this is a time where even investors need to reshuffle and realign their portfolios, looking at the news flows and, you know, from here, the longer-term trajectory.
08:16We've seen a lot of sector rotation as well.
08:18Sectors that you would want to stay away from?
08:21Sure.
08:22So, while there are sectors which we think are likely to underperform, but they are not just because of valuation reasons.
08:32So, for example, we are underweight on most of the commodity-oriented sectors.
08:37We are underweight the energy and utility sector.
08:40And we are significantly underweight the IT sector.
08:43So, for example, the IT sector is not cheap, I mean, not expensive, but it is still underweight because we think that there is a potential for disruption in this sector.
08:53And there could be, it could be a case for a value trap to be, to remain invested in this sector.
09:00So, I think we are underweight the IT sector, energy and utility and material sector.
09:06But, Kavitha, to just highlight a bigger picture, I think we think that the real big challenge in terms of valuation is in companies which are low-growth and low-quality type of companies.
09:20So, these are like cyclical sparks or these are like cigar butts.
09:24These are appearing to be cheap companies, but actually they warrant a far lower multiple.
09:29And these are companies which are really overvalued or are in a bubble zone today.
09:34And we would be extremely cautious in investing in these kind of companies.
09:39All right.
09:41I also want to understand, you know, the kind of news flow that you would be expecting.
09:47November is a very crucial month where, again, the U.S. trade talks would be taking the center stage and making headlines.
09:55I mean, although it has already started, I mean, it's always there in the headlines these days, but yeah.
10:00Okay.
10:01Having said that, I also want to take a check on the IT sector.
10:04Now, the latest statement by President Trump, you know, on raising the fees for H-1B visa.
10:09A lot of experts are analyzing it the way as, you know, it is just a limited reaction that we might see on our Indian IT sector.
10:18But do you also agree to this and also the fact that, you know, the large caps IT especially will be able to absorb a lot of costs.
10:26Mid-cap IT, if they have any exposure, then that could be a problem.
10:30How would you like to explain this?
10:32Sure.
10:33So, I think, Kavitha, the way we would want to look at this sector is like this.
10:39The sector, first and foremost, is not expensive.
10:42And that is very clear based on the current earnings and the current level of business.
10:49However, this is a sector which is dependent on advanced markets because companies are largely export-oriented companies.
10:59And now, when a developed country like US, which is a fairly large customer, it comes out and imposes some sort of these restrictions on the companies, it clearly sends out a very important message.
11:13And the message is that they want to reduce the level of outsourcing or they would want the local population to be getting a much higher number of jobs.
11:24They don't want the jobs to move out of their country.
11:27So, that is a very important concern.
11:29The concern is not about the current impact on the earnings.
11:33It is more about what is the thought process of the government in that country.
11:40And clearly, the message is that they would not want more jobs to be outsourced.
11:47They don't want more jobs to be shipped out.
11:50And hence, I think that is a bigger worry than what is the current sort of the announcement.
11:56So, we would worry more about the future course of action on this sector rather than what has been already announced.
12:04All right.
12:05I also want to understand, you know, your fund house performance so far in terms of investor interest.
12:13Now, the regulator wants, you know, a deeper penetration towards B30.
12:19A lot of incentives for distributors have been announced.
12:22How are you looking at this?
12:23And so far, where is the flow coming in, in terms of funds that you have?
12:28You know, what kind of investor interest do you think is able to be, we can observe or note in your fund flows?
12:38Sure.
12:39So, generally, Kavitha, I am not privy to extremely granular level of data on fund flows.
12:46But I can tell you from the broader picture which we are seeing, the funds are flowing in from across the length and breadth of the country.
12:55Fortunately, there is a very strong move towards financial investments.
13:00And mutual funds as an industry has done very well by making the entire approach towards investing in mutual funds fairly straightforward, simple.
13:12And it's been fairly well educated now.
13:15So, I think most people from even far flung areas are now fairly well versed with what a mutual fund is all about.
13:24And they would want to participate in the India growth story through the mutual fund route.
13:28So, I think generally we are seeing good flows across the length and breadth of the country.
13:33What funds are we talking about where investors are ramping up their investments for your fund house?
13:40Yeah.
13:41I think, as I said, it's across the length and breadth and not particularly concentrated in a particular geography or a particular type of place.
13:53Like, for example, Tier 1, Tier 2, Tier 3 towns are all participating in a very similar fashion.
13:58Any specific scheme where you are looking at good interest coming in?
14:03Once again, we are seeing fairly good participation across different schemes because while there was a point of time when people were more interested in the small and mid-cap schemes,
14:16now there is a fairly well spread out sort of flows coming in across different types of schemes, which could include the large and mid-cap scheme or a flexi-cap scheme.
14:26So, yeah, right now we are seeing a good interest across different types of schemes as well, not just a particular type of scheme.
14:34All right.
14:35I think that will be all.
14:36Thank you so much, Vinay, for taking time out and helping our viewers understand the kind of strategies they might want to have for their portfolio and also helping our viewers understand the market trajectory.
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