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Sundaram MF expects broader economic recovery; has increased exposure to telcos, says Krishna Kumar

Updated : November 27, 2019 12:42 PM IST

S Krishna Kumar, chief investment officer, equity at Sundaram Mutual Fund is of the view that the rally in the stock market so far has been narrow. However, as the rally expands deeper and wider, many of the portfolios will inch towards their peaks, he said.

“The environment is more positive. All efforts of the central bank and the government are aligned towards improving growth and so investors will position themselves ahead of this improved outlook in the next six months,” said Kumar in an interview with CNBC-TV18.

The auto sector has been the worst affected by the economic slowdown in the country with all major manufacturers reporting declining sales through the course of the year.

On the auto sector, Kumar said: "Markets are running ahead in terms of discounting what you see into latter half of FY21. While we expect near-term sluggishness in auto sector be it commercial vehicle, two-wheeler and passenger cars for some time but the strength of recovery or rebound is what we are building in.

“We like passenger vehicles as a preferred play along with CVs [commercial vehicles], which are expected to see a good recovery post first half of next year in terms of good growth. We are cautious on two-wheelers given that BS-VI transition would involve stiffer price hike for consumers.

"However, at the same time all this to turn positive for auto space if the government does provide relief from April 1 for BS-VI vehicles in terms of GST rates or some relaxation of norms."

On the telecom sector, he said: "There seems to be definite improvement in terms of business environment post government intervention. We see steady improvement in pricing environment, some relaxation from the government in terms of cash flows both on licensing, spectrum fees etc and also expect government to consider AGR [adjusted gross revenues] penalties more favourably with a timeline. These are things which could help balance sheets and cash flows of the telecom majors.

"The biggest positive for the sector has been consolidation with now only three players in the industry, which means there could be reasonable pricing power for long-term," he said, adding that the house has increased exposure to the sector.

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