Bajaj Allianz Life Insurance is bullish on Indian pharmaceutical shares, as rising disposable incomes are increasing people's access to better healthcare, said chief investment officer (CIO) Sashi Krishnan. He is also bullish on the banking sector due to attractive valuations despite a slowdown in credit growth. Pharmaceutical shares are likely to outperform the market, he said, adding that, growth in the sector will be driven by the domestic market.
"The increase in disposable income will result in access to improved healthcare. Pharmaceutical companies have the potential to grow by 14% by 2013," said Krishnan, who oversees assets worth Rs 39,330 crore. In the pharma space, the company holds stake in Cipla , Aventis, Pfizer and Ranbaxy. On the banking sector, Krishnan said, "Margins have come down and the next few quarters are going to be challenging.
But the good thing is that valuations have come down. We would not have been comfortable buying SBI at two times the price-to-book ratio." The company's holdings in the financial space includeICICI Bank , HDFC Bank , and Federal Bank . Capital goods and infrastructure are some of the sectors the company has been avoiding due to valuation concerns and challenges in project execution, said Krishnan.
"Suppose there is a power plant which has a PPP signed but there is no permission to mine...There are challenges involving financial closure. It is becoming difficult to raise equity, forget debt. Private equity and venture capital funds are not enthusiastic. The RBI is worried over banks' excess exposure to infrastructure as it has already touched 40%," he said. "The 11th Five Year Plan infrastructure number was Rs 20 lakh crore, while the 12th Year Plan is Rs 42 lakh crore. Unless you target everyone, insurance, pension, where would that money come from?" said Krishnan.
Among other sectors, the company plans to hold on to its exposure in auto stocks though they have been hit by the rise in input cost. "There are the first signs of a slowdown in auto. Sales have come down while commodity prices are going up. From the inflation and financial perspective, demand has come down in both two wheelers and four wheelers." In auto, the company has a stake in Maruti Suzuki.
On the overall market condition, Krishnan said, equities are likely to trade with a downward bias over the next few months and fall 7-8% this financial year amid rising uncertainty over implementation of government policies. "Everybody thinks the government should do something, which is the worrying part. Look at GST and DTC, the government has not been able to implement them. People are not seeing the intent to pass government policies and that is the cause of increasing concern," he said.
"India's savings and investment rate, as a percentage of GDP, has come down significantly. Capital output ratio is down. Market will take cognizance of these things," he added. Krishnan said if India becomes more reasonably priced then foreign funds will flow in. "We see risk appetite taking a toll, especially after what happened in Europe.
US unemployment is stuck at over 9%. There is very little option but to go for QE3. This will lead to monetary expansion and generate some employment. But the downturn in commodity prices will not come down. So a lot of global flows will continue to go in commodity and oil," he said.
"The increase in disposable income will result in access to improved healthcare. Pharmaceutical companies have the potential to grow by 14% by 2013," said Krishnan, who oversees assets worth Rs 39,330 crore. In the pharma space, the company holds stake in Cipla , Aventis, Pfizer and Ranbaxy. On the banking sector, Krishnan said, "Margins have come down and the next few quarters are going to be challenging.
But the good thing is that valuations have come down. We would not have been comfortable buying SBI at two times the price-to-book ratio." The company's holdings in the financial space includeICICI Bank , HDFC Bank , and Federal Bank . Capital goods and infrastructure are some of the sectors the company has been avoiding due to valuation concerns and challenges in project execution, said Krishnan.
"Suppose there is a power plant which has a PPP signed but there is no permission to mine...There are challenges involving financial closure. It is becoming difficult to raise equity, forget debt. Private equity and venture capital funds are not enthusiastic. The RBI is worried over banks' excess exposure to infrastructure as it has already touched 40%," he said. "The 11th Five Year Plan infrastructure number was Rs 20 lakh crore, while the 12th Year Plan is Rs 42 lakh crore. Unless you target everyone, insurance, pension, where would that money come from?" said Krishnan.
Among other sectors, the company plans to hold on to its exposure in auto stocks though they have been hit by the rise in input cost. "There are the first signs of a slowdown in auto. Sales have come down while commodity prices are going up. From the inflation and financial perspective, demand has come down in both two wheelers and four wheelers." In auto, the company has a stake in Maruti Suzuki.
On the overall market condition, Krishnan said, equities are likely to trade with a downward bias over the next few months and fall 7-8% this financial year amid rising uncertainty over implementation of government policies. "Everybody thinks the government should do something, which is the worrying part. Look at GST and DTC, the government has not been able to implement them. People are not seeing the intent to pass government policies and that is the cause of increasing concern," he said.
"India's savings and investment rate, as a percentage of GDP, has come down significantly. Capital output ratio is down. Market will take cognizance of these things," he added. Krishnan said if India becomes more reasonably priced then foreign funds will flow in. "We see risk appetite taking a toll, especially after what happened in Europe.
US unemployment is stuck at over 9%. There is very little option but to go for QE3. This will lead to monetary expansion and generate some employment. But the downturn in commodity prices will not come down. So a lot of global flows will continue to go in commodity and oil," he said.
No comments:
Post a Comment