Axis Mutual Fund expects economic recovery to be a slow process but believes that the top frontline companies are likely to deliver good returns still.

Speaking to media on the sidelines of an event on Tuesday, Chandresh Kumar Nigam, Managing Director, Axis AMC, said the country has not seen such a sharp slowdown in recent times. The fall in railway freight handling and consistent drop in core sector growth with some of them registering a fall in double digit is a cause for worry in the near term.

The recovery from here will be a slow but with good monsoon, the rural economy, which was under tremendous stress, will start reviving soon, he said.

On the benchmark indices hitting a new high even with the lingering economic growth concerns, he said the indices might have hit the all-time high but the broader market is still languishing and even among the index constituents only 10-15 stocks are riding the rally.

Among the 2,000 stocks that are actively traded, only 200 have created wealth for investors and among them just 25-40 stocks can generate alpha. Axis Mutual Fund, he said stays away from cyclical stocks which delivers multiple alpha during good times and crashes below the benchmark in bad times.

As a policy, Nigam said the fund house bets big on corporates with strong balance sheet and good business track record even at the cost of losing a little alpha here and there.

Companies which are leaders in their business have the ability to raise funds at cheaper rates and ride through the difficult times more efficiently, delivering decent returns to investors, he said.

Nigam expects good investment inflow from foreign institutional investors in the second half of next year as the US inches closer to Presidential election.

 

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