4 sectors that will outperform over next 12 to 15 months: Vipul Sanghvi

At what kind of discussions are you having with your institutional clients? Is there worry and nervousness or is there buoyancy? Are they looking for ideas?

Markets are fairly resilient amidst very challenging macro and at the same time, on the flip side, we have a very strong micro story which is running across Indian corporates. Obviously clients, more so the domestic guys are fairly optimistic about the India micro story playing out nicely, while the macro continues to remain fairly challenging.

If the global economy goes into turmoil, we have to face some headwinds as well; but the stock market behaviour is completely alienated from that. Where do you stand on that argument?

I think there are two parts to the story. I completely agree that we cannot remain decoupled for a fairly long time and as global central banks continue to tighten and their currencies, more so the dollar is strengthening, the emerging markets currencies including the Indian rupee (INR) will face pressure.

In order to ward off that pressure, RBI will also have to raise rates fairly swiftly. So that backdrop continues to remain at the back. At the same time, we are amidst a fairly strong micro story which is that Indian corporate balance sheets are fairly lean, bank liquidity and capitalisation levels are fairly within control, rather they are flushed with liquidity and willing to lend. Third, the government is going all out to kick start the capex cycle. Fourth, the real estate sector has turned the corner and that kind of seeds into demand for various sectors which are linked directly to real estate so it be building material, be it consumers, be it cement so everything kind of draws from strength in real estate.

Having said that, we will be very watchful as far as how this entire backdrop of global central banks tightening plays out, how the crude behaves. As we approach winter, it will be a key monitorable from here on.

What are the areas of the market which you are finding attractive right now on risk reward? Right now, almost everything appears to be frothy in stock price terms but areas which have not done well, even if the underlying earnings potential is strong, their risk reward is very attractive.

One large sector continues to be banks and the entire BFSI space. Balance sheets are good; the worst of the asset quality cycle is behind us; credit growth is steadily picking up, the valuations are not outlandish in large banks as yet.

Similarly, in some of the NBFCs and most of the asset backed NBFCs which are focussed on commercial vehicle financing or housing, these are some spots within BFSI space where these are large liquid names and valuations are somewhere in the mid cycle zone and remains one large area for market outperformance from here.

Second, the entire industrial and capital goods basket, which is facing tailwind from China plus one, Europe plus one stories and at the same time, kickstarting of government as well as private capex cycle.

Third, would be the entire construction space which is drawing strength from revival in the real estate industry and fourth would be pharma which is not as far as the broader market is concerned. But we feel that here is the sector where while the US generics market continues to remain challenging, the companies which are focussed on complex generics will gradually do well.

The two other components of the pharma market are India and emerging markets doing fairly well and this sector remains one of the dark horses. These are some of the sectors which going ahead from here over next 12 to 15 months will continue to deliver outperformance.