Best stocks to buy: Fund manager eying India stimulus bets on domestic demand stocks


By Nupur Acharya

As India starts to gradually reopen following the world’s biggest lockdown to contain the coronavirus outbreak, a veteran fund manager says the biggest equity opportunities can be found at home.

Sailesh Raj Bhan, deputy chief investment officer at Nippon India Mutual Fund, favors bets on local companies amid expectations for government stimulus combined with lower interest rates and oil prices. Nippon India, which manages about $15 billion in stocks, remains fully invested in the market and is betting on sectors like automobiles, engineering, cement, utilities and pharmaceuticals.

“One has to be positioned for opportunities in sectors linked to domestic demand, growth and recovery,” said Bhan, who has more than 24 years of experience in Indian equity markets.

The 40-day stay-at-home order for almost all of the nation’s 1.3 billion people that is in place until May 3 has crippled business activity and dented consumption. While general restrictions may be extended, India has begun to allow some economic activity to resume, including the reopening of smaller neighborhood stores.

The S&P BSE Sensex is down 23% from its January record high following a sell-off in March as a spike in virus cases prompted the lockdown. Stocks have rebounded recently but still appear to be pricing in 12 months of weak economic activity and a slow recovery, Bhan said.

Bloomberg

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In a meeting with state leaders this week, Prime Minister Narendra Modi said the country must focus on its economy even as it races to save lives. The government is working on an economic package to tackle the impact of the virus and lockdown but has yet to announce any new specific measures.

India’s consumer price inflation eased back into the Reserve Bank’s 2%-6% target range in March, which is likely to provide greater comfort to the central bank to continue with lower policy rates. The price of a barrel of Brent crude, a major import for the country, has tumbled from around $70 in early January to near $20.

Stimulus added to the low rates and crude prices will boost the economy and share prices, in Nippon India’s view. Among particular government steps, Bhan looks for a relaxation of the goods and services tax, which would help jump-start consumer demand.

“We expect to see at least 50% of the economic activity coming on track by the end of May,” he said. The fund manager sees the momentum building from there to reach a “reasonable level” by around September, the start of India’s festival season.





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