Sectors to bet on: Telecom and pharma top sectoral bets in this market: Axis Capital

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We do have non-lenders like insurance companies and asset managers in our portfolio, says S Subramanian, managing director.

Tell us a little bit more about the kind of companies that are participating in Axis Capital Conference and what we can look forward to over this five-day period.
We are having a second series of our Axis Capital Digital Connect series. Under the new normal, we cannot have physical conferences but we wanted to make sure that investors and corporates are able to meet each other again and exchange views and understand what is happening in the companies. So this is a second series of our conference. We had the first series in the first week of June. This is a second series. We have about 45 companies participating now; broadly about 20% of the India market cap across sectors. This is not focussed on a particular sector.

We have companies from pharma, technology, banking and financial services and insurance. We also have lenders. We have utilities, auto companies, IT services, cement and engineering. We have companies across the spectrum at this particular conference. We just want to make sure that investors get a fair sense of what is happening in these companies so that they can make a well-rounded view of the companies when they are making their investment decisions.

In the basket, you did not touch upon consumption and I am wondering what would be the kind of sectors you would focus on?
It is my mistake. We have companies from the consumption sector. We have companies like Westlife, Polycab, Crompton Greaves Consumer Electronics on the consumer durable side. We have Pidilite. We have companies in the consumption industry. We have Indian Hotels. So we have companies across the board including on consumption as well.

Where do you see signs of peaking out coming in just as a sectoral theme?
Clearly from our point of view, the market is running in terms of what the liquidity has done. Global liquidity and Indian liquidity has essentially put interest rates down and taken the PE multiples up. We think that the current year FY21 and FY22 numbers have been revised downwards by almost all the market participants and the markets are adjusted to the liquidity and the earnings fall. At this point in time we are still a little bit underweight in terms of financials, particularly in terms of the lenders. Of course we do have non-lenders like insurance companies and asset managers in our portfolio because they are not in the Nifty or Sensex. So within the financials, we are weighing more towards that; financials itself is underweight.

Having said that, amongst the consumption sector, I think telecom stands out significantly for us and we would love to move a little bit more towards auto. But I think the auto stocks have recovered pretty significantly. What the market has done essentially is that it has seen the opening up of the economy from the lockdown and seen that the supply issues are not going to be there any longer. However, we still need to look at whether the consumption or the demand side is going to be as strong as we see in other parts of the globe.

China has seen a V-shaped recovery; parts of Europe and more the US are looking at a V-shape recovery. We still are not looking at a V-shaped economic recovery. We think it is more like a W or a U-shaped recovery. But the liquidity is making sure that the multiples are back. Telecom is my favourite sector. The next after telecom would be pharma. I would look at the rural-oriented ones. One of the reasons why we like companies in the agro chemical sector is because rural demand is going to be there and some of us are waiting for price correction in autos.





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