Manishi Raychaudhuri, Asia Pacific Equity Strategist at BNP Paribas, spoke to CNBC-TV18 about the market fundamentals as well as specific stocks and sectors.
Sharing his rationale on upgrading India, Raychaudhuri said, “Unfortunately all across Asia, if not global equities it looks like a perfect storm right now. This is something I don’t think anyone had anticipated even about 2-3 weeks ago. Number one there was an expectation of the trade war coming to a conclusion or at least seeing the signs of getting sorted out around the time the US-China Summit took place in late June. Second, around the same time or just prior to that we had the new government formation in India and there were certain expectations from the budget. Third, we have seen that general macroeconomic or rather consumption demand slowed down across the Asian region for various reason have been very sharper than anyone had anticipated. So if I were to put all three things together over past 2-3 weeks it has almost turned out to be a perfect storm for Asian and Emerging market equities.”
“On a relative basis though India still does look superior compared to many other parts of Asia because the fundamental drag on corporate earnings seems to be stronger in North Asia than in South Asia and India.”
On advising stocks, he said, “The advice can possibly be summarised in one short sentence which is boring is beautiful. If you can find boring stocks which are likely to stay defensives, likely to stay flat, likely to have decent dividends yields than that is possibly the best hiding place at this point in time and this is something that we have been advising investors all across Asia.”
“There are two main themes that we are playing number one - play stocks with high dividend yield and sustainable cash flows so that those dividends can be sustained over a long term future. Number two play domestic consumption across Asia because international consumption which is sort of underpinned by exports that is unlikely to be stable in a world which is afflicted with protectionism, so these are the two main themes that we are playing.”
“When it comes to India, there is one other sector or one other theme which might do well at least in the short term which is possibly the IT services or at least the top-ranked IT service stocks. Now we are seeing possibility of competitive devaluation with an acceleration with a trade war and at least over a short term it has affected India also, so the best currency hedge are those exporters. That is how investors should possibly play it.”