The Hindu Business Line : ‘Don’t constrained by elements like market-cap’

Kolkata, Sept. 16 Not everybody in the market may be fired up about sectors such as textiles or even healthcare, but there is a need for identifying what are clearly ‘contra’ plays, argues Mr Sandeep Kothari, Fund Manager, Fidelity International. “If certain segments are doing exceptionally well and if such trends are expected to carry on, good companies operating in those segments should be considered for building portfolios”, he notes. Here, in this interview, he addresses a range of issues.

Excerpts

How should investors approach the equity market now?

It is important to spot trends and act accordingly. That sounds like a very general statement. However, it is quite appropriate. Someone who is trying to identify a broad trend now may find one in, say, capex opportunities. The idea is to check out companies that stand to benefit from their emerging capex positions. Or take the case of companies that are particularly affected by interest rate cycles. May be, these are companies that are hit because their cost of capital has seen a major increase in the context of rate changes.

It is also important, in a manner of speaking, not to be constrained unnecessarily by elements like market-cap. That said building a well-diversified portfolio is vital. If a certain segment of the economy is doing superlatively and the trend is likely to sustain, efficient companies representing that segment should be considered for inclusion in portfolios under normal circumstances.

What will you call ‘contra’ at this juncture?

Let me refer to the auto space, which has lately seen plenty of ups and downs. For some sections, here is area that should be approached with extreme caution. For others, it may well be healthcare, parts of which seem to have fallen behind in recent times. Marking out good contra plays and staying invested in them requires a certain discipline. I do not wish to give you specific instances or refer to individual stocks here, but I can tell you that not every investor may be ready to do that.

In which sectors are you overweight / underweight at the moment?

We have strong views on industrials and capex-related businesses. Consumption-driven areas also have their appeal. These span a range of segments, including media and healthcare. Also, we have approached a few areas very selectively. Cement, for instance, may be mentioned here. In addition, the power sector, which includes power equipment makers, appears interesting.

We are currently underweight on PSU oil companies. Further, certain Indian companies that are tied to global cycles – textiles or sugar, for instance – are being screened carefully. There are exceptions here, of course… like certain brand plays that merit attention.

How does banking/financial services appear to you?

Just check out the markedly under-banked nature of our system. The sector is set to grow over a period of time. The reason is simple: demand for banking services will simply rise. At the same time, the market will want to know about the possibility of Indian banks becoming bigger players. A comparison between Indian and Chinese banks – this seems inevitable – will reveal how the former are placed vis-À-vis those in our neighbouring country. Consolidation, as some quarters contend, may propel growth in the sector.

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