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Fund managers bet on defensives

Source : BUSINESS_STANDARD
Last Updated: Thu, Dec 22, 2011 19:31 hrs
Europe ramps up rescue fund, may turn to IMF

Last week, the Reserve Bank of India (RBI), in its mid-term monetary policy review, paused its rate hike cycle after continuously raising the key policy rates 13 times from March 2010. Looking at the overall slowdown in growth and fall in inflation, the central bank kept the key rates unchanged. Meanwhile, economic growth came down to 6.9 per cent in the second quarter of this financial year, from 8.1 per cent in the corresponding quarter in the previous financial year, even as inflation remains close to the double-digit mark. Industrial growth registering negative growth of 5.1 per cent in October, may have prompted RBI to maintain the status quo. Following the monetary policy, the fund managers of Smart Portfolios Season 4 share their views on the rate-sensitives and defensives this week.

For the week, Rikesh Parikh's net worth stands at Rs 949,000, down 5.11 per cent; Mehraboon Irani's net worth is valued at Rs 805,000, down 19.46 per cent; Ashish Mittal's net worth is at Rs 909,000, 9.11 per cent less; Alex Mathews' is at Rs 983,000, down 1.73 per cent; and Ajay Parmar's totals Rs 969,000, down 3.09 per cent.

Wake up and rush this bill!

RIKESH PARIKH,
VP, equity strategies, Motilal Oswal Securities
"The RBI policy was on expected lines. We are factoring in rate cuts, possibly in Jan–Feb, as headline inflation number has started showing signs of cooling down. I will retain holding in financials and would look to increase allocation at the time of the next policy meet. I have retained my holding in financial stocks," said he, adding:

"In a falling market, defensive stocks are invested for generating relative gains, and so, I would prefer to be invested if valuations remain attractive and growth can be seen."

RIKESH PARIKH, VP Equity Strategies, Motilal Oswal Securities
Top Holdings Cost
price (Rs)
Current
price (Rs)
Value
(Rs lakh)
Dena Bank 76.10 55.20 0.33
Mcleod Russel India 234.20 205.65 0.31
Coal India 339.94 299.95 0.30
State Bank of India 1783.97 1671.10 0.25
Deepak Fertilizers 166.16 124.30 0.25
Total investments

2.39
Cash

7.10
Net worth

9.49

ASHISH MITTAL,
fund manager – PMS, Centrum Wealth
"The RBI clearly indicated the monetary cycle was likely to reverse. I expect this to benefit sectors like auto, banking and real estate to some extent. More important, the lowering of interest rates would mean enhanced ability for the infrastructure sector to expedite delayed projects, as the capital becomes cheaper. However, I would still be on guard and slowly raise exposure to such sectors, once I feel fiscal concerns are beginning to be addressed by the government. I currently have exposure to KA5V1BK2, YES Bank and Bajaj Auto and will hold the same for some time before increasing exposure," he said.

"Meanwhile, I continue to maintain investments in defensives, primarily high dividend yield and cash-rich companies, and would be investing further in companies like Balmer Lawrie, Bharat Electronics, Glaxo Pharma and ITC."

ASHISH MITTAL, Fund Manager – PMS, Centrum Wealth
Top Holdings Cost
price (Rs)
Current
price (Rs)
Value
(Rs lakh)
MRF 6816.10 6961.35 0.70
Balmer Lawrie & Company 618.48 489.40 0.64
KA5V1BK2 372.59 350.35 0.60
ITC 199.36 203.75 0.56
Bharat Electronics 1582.70 1392.05 0.56
Total investments

8.05
Cash

1.04
Net worth

9.09

ALEX MATHEWS,
head (technical and derivatives research), Geojit BNP Paribas Financial Services
"Given the situation of slowing industrial production and inflation showing signs of cooling, I expect RBI to lower key rates at its coming quarterly review on January 24. If that happens, we may see rate-sensitive sectors like bank, infrastructure, realty and auto witnessing some value buying. With this perspective, I have taken a long position in IB Real Estate," he said. "Pharma and fast moving consumer goods stand out among defensives. But given the European crisis, the businesses are expected to be sluggish. If the pharmaceutical Bill is passed, we may see short- to medium-term impact on the revenues of pharma companies. But among pharma majors, I expect Cipla, Lupin and, even, Dr Reddy's to show positive trends. I am waiting for the markets to consolidate before committing a large trade."

ALEX MATHEWS, Head-Technical and Derivatives Research, Geojit BNP Paribas Financial Services
Top Holdings Cost
price (Rs)
Current
price (Rs)
Value
(Rs lakh)
Indiabulls Real Estate 51.78 48.00 0.48
Tata Coffee 897.89 777.90 0.19
Bajaj Financial Services 571.78 414.75 0.10
Bharat Petroleum Corp 559.24 521.40 0.05
Larsen & Toubro 1385.51 1004.80 0.05
Total investments

0.88
Cash

8.95
Net worth

9.83

AJAY PARMAR,
co-head, investment banking, Emkay Global
"I think there is still some pain left for interest sensitives. All eyes will be now on third-quarter results, which would spell out a lot of pessimism, as corporate results are likely to be the worst in recent times. I believe the recent rise in the market is not sustainable," he said.

Top 10 global retailers

"The defensives like consumers were perhaps the only place to hide in the current market condition. Unlike in 2008-09, pharma companies have not participated as a strong defensive play, as there was a moderation in domestic growth. I believe consumers is a good story with asset-light models, higher ROE (return on equity) and ROCE (return on capital employed), debt-free status and net cash positive earnings. However, since there were only few defensives left, most investors were overweight, leading to higher multiples."

AJAY PARMAR, Co-head, Investment Banking, Emkay Global
Top Holdings Cost
price (Rs)
Current
price (Rs)
Value
(Rs lakh)
VIP Industries 85.06 85.45 0.43
Jubilant Foodworks 792.33 796.70 0.40
Future Capital Holdings 118.40 116.35 0.35
Gati 28.52 28.30 0.28
Larsen & Toubro 996.38 1004.80 0.25
Total investments

2.12
Cash

7.57
Net worth

9.69
MEHRABOON IRANI, Principal & Head – Private Client Group (PCG), Nirmal Bang Securicies
Top Holdings Cost
price (Rs)
Current
price (Rs)
Value
(Rs lakh)
Idea Cellular 93.57 81.65 0.82
Bharti Airtel 382.52 335.20 0.75
Ranbaxy Laboratories 462.76 419.05 0.71
Delta Corp 97.91 61.50 0.58
MRF 7206.77 6961.35 0.56
Total investments

7.68
Cash

0.37
Net worth

8.05

For Smart Portfolios, visit www.smartinvestor.in/sp



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