2014 would see reversion to mean: Neelesh Surana - The New Indian Express

2014 would see reversion to mean: Neelesh Surana

Published: 16th December 2013 05:18 PM

Last Updated: 28th February 2014 12:20 PM

In an interview with Ashwini Kunder of myiris.com, Neelesh Surana, head of equity, Mirae Asset Global Investments India said, "2014 would see full impact of positives of oil reforms, monsoon, correction in commodity prices, and improvement in global economy."

1. Do you see markets higher than current levels by year end? What is your market outlook for 2014?At an overall level, market is trading at about 15 times FY15 earnings which is close to its long term average. However, as compared to long-term average is valuation is reasonable owing to two factors: [a] The current P/E should be seen in context of depressed 'E' (Earnings) across many sectors where mean reversion is yet to take place; and [b] differentiated P/E multiples across sectors.We are positive on markets and believe that 2014 would see reversion to mean on various counts- overall GDP growth, earnings growth, and most importantly correction with respect to under allocation towards equity. 2014 would see full impact of positives of oil reforms, monsoon, correction in commodity prices, and improvement in global economy. First half would have caution owing to the impending elections. We believe that it is stock pickers market, and sock selection would remain important to yield decent returns.

2.What is your investment strategy at current levels? What is the strategy for the next couple of quarters?Our investment strategy remains the same and would not change on quarterly basis - we remain focused on stock selection driven by individual merit of business. As regards to value or growth style, we prefer growth oriented businesses- however, we would avoid chasing growth at high price.3. How do you see India Inc. earnings performance for Q2 FY14?At an aggregate level, sales grew by 13%, and Profit After Tax (PAT) by 7% in Q2 FY14. Most of the large sectors performed either above or in line with estimates. Highest outperformance (vs. expectations) came from IT, Autos, Telecom and Private Banks. During the second half, we have seen export oriented business doing much better on account of recovery in US and aided by rupee depreciation. Post the Q2 results, there is marginal revision in Sensex EPS for FY14 and FY15. Sensex EPS is now expected to grow by about 16% to 1,500 in FY 15.4. Which sectors will likely to outperform or underperform in near term future?We believe that sectors like FMCG, cement, asset-heavy infrastructure could underperform in the near term whereas export oriented sectors like IT, pharma, private banks, downstream oil companies could outperform.

5. How do you see rupee performing ahead?Webelieve that currency would stabilize at current levels. CAD is being brought down by encouraging exports and measures to bring down the import of Gold. Exports are growing double digits and the full benefit of INR depreciation is still not realized. On a more long-term basis, inflation indexed bonds would help reduce investment related gold demand. As regards to tapering we believe it is a given event, and it does not matter much on fine tuning of timing.India is better prepared in terms of coping with tapering than we were few quarters back, because of reduction of CAD, revival of export, and also large FCNR deposits raised recently.6. According to you what retail investors should do in the current market situation?Despite one of the most challenging period, in the last five years, our experience is that well managed funds have delivered decent returns of about 12-15% CAGR. We would advise investors not get deterred by macro noises and invest in a disciplined way in mutual funds and follow a well-disciplined asset allocation.

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