Summary
Vetri Subramaniam, CIO, UTI Mutual fund, presents key macro trends, equity valuations, and investment strategies. Vishal Chopda, fund manager, UTI focussed fund, presents the fund’s investment strategy.
Highlights
India’s Economic Outlook
- India’s nominal GDP growth has recently stayed below 10%, a change from its historical trend of double-digit growth.
- With core inflation at 3.4%, benign oil prices, RBI has headroom for lowering the interest rates.
Market Valuations
- With nominal GDP below 10% expected Nifty eps growth @ 13% depends on operating leverage rather than revenue growth which looks difficult. All ratios for Nifty 50 in expensive territory. Midcaps and smallcaps are much more expensive.
- Spread of 10-year GSEC over Nifty 50 yield at 2.17%, a decadal high, makes debt an attractive option over Equities.
Investment Opportunities
- The Banking and Financial Services sector is viewed favourably due to below-average valuations and strong fundamentals, Health care has gone up but can be a defensive sector. Consider largecaps for SIP and Hybrids for lumpsums investments.
- SIP in Innovation fund can be considered by investors looking to invest over the next 10 to 15 years.
UTI Focus Fund
- The UTI Focused fund, allows for investment in a maximum of 30 stocks using a blend of growth and value investment style. It is recommended for investors with a minimum time horizon of 3 to 5 years to potentially achieve positive returns.
The fund identifies opportunities within three buckets: sustainable businesses (primarily strong ROE/ROCE companies with strong return ratios for 3-5 years and growth potential), cyclical opportunities (companies with attractive valuations poised for mean reversion), and transformation opportunities (companies undergoing challenges with potential for turnaround
