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    Expect broader markets to do well hereon; prefer auto ancillaries over OEMs: Sundaram MF

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    Expect broader markets to do well hereon; prefer auto ancillaries over OEMs: Sundaram MF

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    S Krishna Kumar, CIO Equity, Sundaram Mutual Fund, believes there is a positive trajectory in the market. “Particularly in the broader end of the market – midcaps and smallcaps, we would continue to see the markets reflecting the strength of performance of these companies,” he said.

    S Krishna Kumar, CIO Equity, Sundaram Mutual Fund, believes there is a positive trajectory in the market. “Particularly in the broader end of the market – midcaps and smallcaps, we would continue to see the markets reflecting the strength of performance of these companies,” he said.
    In terms of IT stocks, he said, “In a diversified portfolio, IT gives a lot of comfort in terms of having a lot of downside protection. There is a fairly strong order pipeline and visibility of growth over the next 12-18 months in terms of the business coming from people moving to cloud, digital transformation of businesses and many companies moving to work on artificial intelligence, machine learning and build in a lot of these into their businesses."
    "So there has been a huge amount of improvement in the value added services that these companies are able to bring on to the table and it is those companies which are at the forefront of the emerging technologies that are doing well not the complete IT pack. We have to be more stock specific within IT space at this point in time.”
    According to him, government is walking the talk in terms of privatising the PSU banks. “That brings a lot of life to these companies. The larger ones have consolidated, observed all the mergers and now they are probably well set to benefit from the big distribution franchise and the deposit franchise they have. The large ones will emerge stronger and the valuations are definitely very supportive of these companies, the large PSU ones,” he stated.
    On auto sector, he mentioned, “There has been a bit of a soft patch in terms of demand in different geographies and different vehicle segments. Sharp pullback in commodity prices is putting a lot of pressure on the profitability of the auto majors. Given the current valuations of some of the passenger vehicle (PV) companies, I would be quite neutral in terms of my outlook on the auto space from original equipment manufacturer (OEM) perspective.”
    “However, auto ancillary companies which have a much broader spectrum of domestic supplies, after markets and booming export market, they are in for better times and are probably going to benefit from better demand which is driven by multiple geographies. The auto ancillaries look better to me at this point than auto OEMs,” he pointed out.
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