‘Markets will remain volatile till budget'

“We are at a juncture from where if we don't go forward, even status quo will be perceived as a negative,” says Mr Waqar Naqvi, CEO, Taurus Mutual Fund, commenting on his expectations from the upcoming Budget. In an interview with Business Line, he shares his insights on the stock and debt markets. Edited excerpts:

What is your outlook on the markets now? Which sectors do you think are on a stronger ground?

Well, it is going to be quite volatile for some time now. The same factors that are influencing the fixed income policy of the RBI are affecting the equities markets too. It is now threatening the profits of corporates too and may also slow down our GDP growth. FIIs are therefore pulling out of Indian equities now.

I would like to wait for the budget for more clarity. I think the markets will remain volatile till the budget. That said, I don't see a dramatic fall from current levels too.

One sector we are bullish on is FMCG (especially companies in the food sector). What we have seen is that though in rural areas — where there is a lot of money — consumption trends are strong, it is more towards food products rather than consumer durables.

We are also bullish on IT, fertiliser and chemicals. As for banks, their performance would be entirely dependent on the economy's performance. So, for now we are underweight on banks. We are however positive on automobiles and two-wheelers, to some extent.

On pharma, while we aren't negative on the sector, we aren't bullish either. We don't expect the sector to really take-off, but at the same time expect it to hold its ground if the markets remain weak.

So, what are your expectations from the budget?

At this point in time, I am unsure on what to expect from the budget. The government has been so paralysed. We haven't seen many meaningful developments, be it the FDI policy, insurance policy or even the telecom policy. At this juncture, honestly one is unclear what to expect in the budget.

Do you think there's a possibility that it may become a non-event?

The budget becoming a non-event is a major worry, in fact. I hope the budget is not a non-event and reforms don't take a back seat.

Look at infrastructure; it is a sad story now. The sector is suffering from a slowdown and the stocks haven't performed. The government was expected to take sufficient steps to encourage infrastructure development, but there have been so many execution hurdles.

The Mumbai airport hasn't yet taken off, traffic bottlenecks still persist in most cities and Metro work has been going on for years now. And that is precisely why the budget is important. We are at a juncture from where if we don't go forward, even status quo will be perceived as a negative.

With interest rates moving up, what is your advice to investors looking at debt options?

I would recommend investors to get into debt funds with short maturity periods at this point.

If you look at our short-term income funds, returns have been good across time frames, only because we kept the average maturity low to less than a year.

In our newly launched dynamic fund too we will sport a short maturity portfolio only, at least till the time we feel that the rates will begin to decline.

So, when do you see such a decline happening?

It is difficult to be very sure. We just saw a rate hike now and even after that if inflation continues to be problem, it is not easy to know for sure what action RBI will take. That said, look at China. It has beaten its GDP forecast of last year and has said that it will also get its inflation below its forecasted level.

So obviously there are ways and means of controlling inflation. We however don't see a scenario of a declining interest rate on the horizon in the immediate future. Even if rates don't go up, they are definitely not coming down.

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