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    This Rs 1,100 crore fund manager advices parking some funds in gold, bonds amid volatile equities

    Synopsis

    We have already seen a major correction in developed markets. US markets have given up all the gains post pandemic. Lately, the dollar has shown a topping out scenario due to decline in inflation.

    Amit Gupta1-1200ETMarkets.com
    Manufacturing has remained very small for a very long period in India.
    Volatility in equities can increase when geopolitical risk emerges. Given that such risks persists for the market, Amit Gupta of ICICI Securities recommends taking some exposure to gold and bonds to reduce risk and diversify portfolio.

    “Having a 10% exposure to gold makes sense in such a scenario. Gold performs in such periods. As the interest rate cycle seems to be coming to an end in 2023, we can allocate 20-30% to debt also,” said Gupta, principal officer and fund manager - PMS, who handles funds worth Rs 1,100 crore. Edited excerpts of Gupta’s interview with ETMarkets:


    The start to the new year has not been good for equity markets. What’s your outlook for 2023 given that recession is looming over some of the developed economies?
    The yield curve inversion in the US bond markets started a couple of quarters before, that is where equity markets also started factoring the recessionary impact.

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    We have already seen a major correction in developed markets. US markets have given up all the gains post pandemic. Lately, the dollar has shown a topping out scenario due to decline in inflation.

    This is where emerging markets would start getting FII flows in 2023. Money is flowing into value pockets like what we saw in Hang Seng, which moved up by 50% since Oct, 2022. Intermediate declines in Indian markets would attract FII flows as valuations would become attractive with unabating EPS surge.


    Which sectors/stocks are looking attractive to you and would want to add to your portfolio in 2023?
    Banks, capital goods, power, chemicals and telecom should remain the top sectoral themes for 2023. Consumer discretionary will remain the evergreen theme in India but only in selected categories like ACs, SUVs, etc.

    Some recovery may be seen in select IT and pharmaceutical largecaps but doesn’t seem to be sustainable.

    Lower NPAs and higher credit growth would continue to drive banks’ earnings.

    Reforms in the power space and a move towards renewable energy would lead to higher growth. Higher tariff rates would be the key driver for ARPUs in telecom and higher government expenditure and private capex would drive earnings in capital goods companies.

    What kind of diversification in asset allocation would you recommend to your clients in an expected volatile market conditions?
    Volatility can increase when geopolitical risk emerges. Thus, having a 10% exposure to gold makes sense in such a scenario. Gold performs in such periods. As the interest rate cycle seems to be coming to an end in 2023, we can allocate 20-30% to debt also. Remaining allocation should come in equities where higher growth is expected.


    Which pockets within the midcap and smallcap segment look attractive to you and why?
    Custom synthesis players and manufacturers of fluorochemicals would be the key beneficiaries in the chemicals sector. Midcap private banking is also looking attractive.

    Capital good players which cater to cement, power and mining would benefit going forward. Cement space is going to witness massive capacity expansion which is where the OEMs can remain sideways due to higher supply than demand. However, the material providers to them would see higher flows.

    But a selective approach towards this segment can work. One can identify the reasonably valued, higher market share and clean management companies where sectoral tailwinds are high.


    What are the innovative products ICICI Sec PMS offers to customers that differentiates you from others?
    Along with actively managed schemes like ACE Equity portfolio, we also offer smart beta strategies which are a combination of active and passive style of investment. We also

    manage money in multi asset schemes where we do allocation in gold and in other alternate assets along with equity and debt.

    What are the key changes you have seen in the retail investor’s investment behaviour over the last 1-2 years?
    Investors have become more mature and robust SIP flows continue despite intermediate volatility in the markets. This is quite heartening because the investments in weak markets lead to higher returns in good markets.


    Everyone today is playing on the manufacturing theme. What are your major investment bets in this segment and why?
    Manufacturing has remained very small for a very long period in India.

    Time is changing now as government reforms like the PLI scheme with the macro enabler of China+1 have led to higher flows into India’s manufacturing space.

    Apple is talking about 25% of iPhone production in India by 2025. B2B companies are emerging which will be a major beneficiary of this turnaround. So, defence, API, electronics, engineering goods, solar equipment manufacturing, etc are the major themes coming up.


    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)




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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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