“I think the time has come to relook at the pharma space, not in a very aggressive manner but some amount of bottom fishing should be looked at these names. We are confident in FMCG but we do not have that sort of confidence in the pharma sector,” says
Sandeep Tandon, CIO, Quant Mutual Fund.
I can see a smile on your face for a change, how good are the funds doing?
Reasonably well, given the environment which we are in. If you recollect, we have been propagating how a dynamic style of money management will deliver better returns and this is what we have been practicing because in this changing world and extremely volatile environment, that is the best way to capitalise and generate superior returns.
What is your stand on the two important components which you track on a macro basis? Have the decline in the global commodity index and the tapering off on the dollar index reversed inflation?
From a very near and medium-term perspective, the answer is yes because it is not only about these two parameters. We believe that we are very close to a lot of inflection points in various global markets. The dollar index is one. If you look at a lot of risk appetite indicators or any other complex macros, multiple data points are showcasing that we are close to an inflection point.
So most of the fear indices of the various asset classes have spiked significantly. They have not reversed completely but they are spiking and that means in the next 8-10 trading sessions, we will be closer to very important inflection points in the global markets.
What has been your portfolio strategy of late? Where are you taking some chips off the table? For the next three months, what is the better trade? Stay with the financials or look at the contra names like IT?
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One can look for some IT exposure. We have very recently increased our IT exposure because this is not a core position but one can say it is a non-core position or a tactical bet because we believe that even the US market is very close to infection point. The Quant capitulation index for US equity, particularly for S&P, has spiked significantly and maybe in next few trading sessions, it is very difficult to pinpoint because it has not reversed.
As of now, 3-4% correction is happening but post that, a very sharp rally is not ruled out which can be 10% to 15%, 20% sort of move. That is the way data points are emerging. With that background, we would like to own some of the technology names from a tactical perspective.
One is also seeing a bit of a tactical shift, underperformers or non-performers like pharma, for instance, on which is sitting at a life high. FMCG has been going very strong. It was restricted to a move on about six months back, now that is replicated across the board. What are you making of pharma and FMCG sectors and are you adding positions here?
We have increased our FMCG exposure last month itself and pruned down some of the banking names. We believe in the structure change and the volume growth that most FMCG companies will be reporting. Structurally, we are very constructive on the consumption name, not from a longer term perspective but at least from a medium term perspective.
Pharma has been a laggard and has disappointed for a while. I think they also have reached a stage where they have again hit neglected territory. One or two names have done very well and have been outperformers in the market. and obviously they have been outperforming from the pharma perspective in a big way.
I think the time has come to relook at this space not in a very aggressive manner but some amount of bottom fishing should be looked at these names but we are confident on FMCG. That sort of confidence we do not have in the pharma sector because in general, numbers have been disappointing. It will be too premature to say whether we have seen the bottom in terms of earning momentum or not.
What about your outlook on the risk appetite indicators when it comes to investing in the mid and the small end of the market?
From the middle of June, we saw some amount of exhaustion happening in the risk appetite indicator including the liquidity aspect. That is the reason we have seen a very sharp reflex rally in the global market, particularly in the Indian market.
Going forward, we see some sort of corrective phase from the risk appetite parameter but they are broadly up. I will look for a buying opportunity in these names because the risk appetitive from mid June onwards have improved significantly and that is still inching up. I always talk about Bitcoin sentiment data for the young generation risk appetite data and that has not collapsed. Despite the correction which we have seen in the global markets or various asset classes, Bitcoin has not shown any signs of weakness and is somewhere around $21,000 to $19,000. So risk appetite at least for India is very constructive.
I believe that some amount of exhaustion is seen in the global markets also. By mid October or so, we might see some sort of reversal in these data points also.