ETMarkets Smart Talk- Next decade belongs to India; Bandhan Bank, Hero Moto among top 9 value picks: Varun Saboo

In an interview with ETMarkets, Saboo said: “Some of the value picks which we like – Bandhan Bank, Spandana Spoorthy, IndusInd Bank, Hero Moto, Emami, Arvind Fashions, Sagar Cement, PNC and L&T” Edited excerpts:
We hit record highs in June 2023. What is your outlook on markets?
Markets have rallied sharply from the lows (Nifty moving up 2500+ points). Rally in some of the midcaps has been very sharp.

One can expect markets to consolidate for some time here, which can mean interim corrections of 5-7% on Nifty. However, we remain overall quite bullish with a 12-month plus perspective. We believe the next decade is of India.

Interesting trend in MFs! We have seen SIP money inching towards Rs 15000 cr in May – it does reflect the maturity of retail investors. But, will the trend continue?
SIP inflow trajectory in the last 4-5 years is clearly showing a big uptick of Equity/MF literacy in our country.

We have seen Covid times as well, however, SIPs have only grown. We expect this trend to continue and believe incrementally SIPs to keep growing.

Rates are on hold in US and India. What is the trajectory you foresee in the near future and how will it impact equity markets?
End is clearly in sight in terms of the interest rate rising scenario. There could be one or two more 25bps hike in the US if inflation print again rises. In India, it looks unlikely that we would have any further hikes. What is happening in China? Are slowdown fears more real there? Is there any takeaway for India or the metal sector?
The Chinese economy has been going through a major slowdown, there are ways in which their Govt is looking to incentivize their companies and people at large. However, nothing concrete has come up.

Don’t see any impact on Indian markets from this. The metal sector in India could remain firm, considering the possibilities of QE in China, which could lead to Metal prices remaining firm globally.

FIIs are slowly moving back to Indian markets. But will the trend continue as valuations are no longer cheap as compared to other EMs?
FIIs clearly missed the bus. Despite selling upwards of Rs3.8 trn in last 2.5 years or so, Indian markets are near ATH.

Fundamentally, India is in the best shape coupled with very strong liquidity with Domestic funds.

Believe underperformance would clearly be hitting FIIs, which has led to the inflows we are seeing from them. Believe FII flows to remain steady going forward.

Which sectors are you overweight and underweight on?
We are very bullish on Consumption as a theme. We like Consumer staples, Consumer discretionary and Retail plays to play the consumption theme.

We remain positive on 2Ws as we see Rural picking up. We remain positive on NBFCs as a theme. Most bullish on MFIs. We also remain bullish on some of the construction plays.

Any value picks that investors can look at for the next 12 months?
Some of the value picks we like – Bandhan Bank, Spandana Spoorthy, IndusInd Bank, Hero Moto, Emami, Arvind Fashions, Sagar Cement, PNC and L&T.

How should investors play the small & midcap theme in 2H2023?
Investors should be selective in the Midcap space going forward. Look for opportunities where valuations are still comfortable coupled with improving outlook going forward. Waiting for corrections to accumulate would be a better strategy.

How do you pick stocks for your portfolio? What are the filters that you use?
Most important is to filter down sectors on a top-down level which are looking to turn around. In that space, we look at companies that have a promising outlook for the next 2-3 years.

The best is to look at companies that might have pressure in the next Quarter or two, while the outlook on a longer term is quite positive.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)