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'Consumption will drive the Indian economy'

Source : BUSINESS_STANDARD
Last Updated: Thu, Mar 10, 2011 19:20 hrs
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In the second series of interviews for Smart Portfolios, Shishir Bajpai, senior vice-president at IIFL Private Wealth, spoke to Ushamrita Choudhury on the strategy he adopted in a volatile market environment. A choppy market over the past week saw the benchmark S&P CNX 500 portfolio value fall 0.4 per cent to Rs 9.66 lakh. Ajay Parmar's portfolio appreciated 0.7 per cent to Rs 9.29 lakh, while Vinay Khattar's investments reflected a decline of 1.1 per cent to Rs 10.77 lakh. Bajpai's holdings were up 1 per cent to Rs 12.94 lakh.

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What investment strategy did you adopt to consistently outperform the benchmark'
We were very bullish on the markets when the portfolio began in August, and adopted an aggressive strategy with our investments. This helped generate a big alpha for us. Over the past few months, however, a lot of concern has been plaguing the markets, and, therefore, we have chosen a much more defensive strategy. Our current focus is more at value buys and largecap stocks.

How will the tax breaks for investment in housing augur for realty' Will the infra sector benefit from the infra-related proposals made in the Budget'
Tax breaks for housing investment will primarily be beneficial for those realtors who are more focused in low-cost housing. The sector has lately been underperforming because of rising interest rates and near-all-time high real estate prices across the country. This is making housing unaffordable for buyers.
 

SHISHIR BAJPAI, Senior Vice-President, IIFL Private Wealth
Top Holdings Cost
price (Rs)
Current
price (Rs)
Value
(Rs lakh)
Reliance Ind 1025.98 984.75 1.28
Pantaloon Retail 317.17 270.85 1.22
HDFC Bank 2085.14 2208.40 1.21
Dr Reddy's 1681.15 1590.35 1.19
SBI 2747.58 2589.75 1.17
Total investments     9.47
Cash      3.47
Net worth     12.94

As far as the tax deduction extension for infra bonds and the issuance of tax-free bonds by infra companies are concerned, there won't be significant benefits for the sector. Nonetheless, this is a move in the right direction, because it will help firms raise long-term debt. The real issue with the infrastructure sector is not just financial closure; governance issues related to necessary clearances required, once projects get allotted, and their timely executions, are major roadblocks.

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After the Budget, which sectors do you favour, and why'
Consumption will continue to drive the Indian economy. The government's policies are also clearly directed towards bolstering consumption. There is a greater focus on the rural economy, with the government trying to provide direct benefits to the poor. This, in turn, is increasing the consumption power and pattern within a large section of the population. Select consumption-based sectors, pharma and information technology in my opinion, will do well.

Individual foreign investors will be able to invest directly in mutual funds. What impact will this provision have on the markets'
There will not be any direct impact in the markets immediately, but over a longer term, this might help the mutual fund industry in shoring up additional businesses, and expanding their base. This may eventually reduce their dependence on domestic investors for raising funds.

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At what levels do you expect oil prices to stabilise' Are geopolitical headwinds in West Asia and Africa harmful for the domestic economy'
Crude oil prices are rising more out of fear than any other fundamental reason. The developments in West Asia have been the main reason in the recent spurt in oil prices. Oil prices are fuelling the already ballooning current account deficit, and also forcing the government to further defer oil sector reforms.

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What is your outlook on India Inc over the next couple of quarters'
Earnings growth will decline over the next few quarters. India Inc has been struggling with rising input costs and interest rates. Capacity expansions have also been slow. Unless the government really moves fast with its policies and reforms, and there is a decline in input costs along with the interest rate cycle moving down, the pace of earnings growth will continue to decline.
 

AJAY PARMAR, Head Research (Institutional Equities), Emkay
Top Holdings Cost
price (Rs)
Current
price (Rs)
Value
(Rs lakh)
Torrent Pharma 599.00 512.65 0.77
Natco Pharma 291.03 256.15 0.70
eClerx Services 546.00 653.50 0.65
Infinite Comp 181.60 161.95 0.49
Insecticides India 233.05 302.80 0.45
Total investments     6.45
Cash      2.84
Net worth     9.29
 
VINAY KHATTAR, Head (Research of WAIS), Edelweiss
Top Holdings Cost
price (Rs)
Current
price (Rs)
Value
(Rs lakh)
IndusInd Bank 220.68 243.35 1.10
Havells India 305.36 344.15 0.98
Tilaknagar Ind 58.23 60.35 0.88
Dish TV 60.51 61.85 0.77
Coromandel Int 280.20 287.80 0.69
Total investments     7.83
Cash      2.94
Net worth     10.77



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