Dalal Street Voice: Plenty of opportunities for bottom-up stock picking for investors in 2022: Harshad Patil of Tata AIA Life Insurance

Harshad Patil - Executive Vice President & CIO at Tata AIA Life Insurance Company Ltd believes that the market movement will be more stock specific going forward and the fund performance would depend more upon bottom-up stock picking skills.

WATCH | Click on Zee Business Live TV Streaming Below:

Patil has extensive experience of over 20 years in a gamut of areas pertaining to investments such as fund management, research, and dealing functions. His prior assignment was with UTI Mutual Fund for over 7 years in various capacities linked to fund management and dealing.

In an interview with Zeebiz's Kshitij Anand, Patil said that even in the mid-cap space while many stocks have run up significantly, there exists plenty of opportunity for bottom-up stock picking. Edited Excerpts -

Q) RBI maintained a dovish stance while keeping the interest rates unchanged. What is the rate trajectory you foresee in near future?

A) The Monetary Policy Committe (MPC) of the Reserve Bank of India (RBI) left policy repo and reverse repo rates unchanged and continues to remain dovish as Central Bank’s priority is to support the nascent growth impulses in the economy.

The cancellation of the G-sec auction has turned demand-supply dynamics favorable, at least till March 2022 and may keep rates supported till then, post which excess supply on the back of a large FY 23 government borrowing will lead to an increase in yields.

We believe that the bond market will need active support from the RBI from April 2022 onwards for smooth and non-disruptive completion of the FY23 government borrowing.

Moreover, the market would closely watch developments around the inclusion of government bonds in global indices in the second half of FY 2023.

Going forward, the RBI is expected to normalise policy in a calibrated manner as the MPC continues to maintain that the economy needs sustained policy support to nurture the recovery.

Hence, we expect RBI to remain accommodative and the repo rate to remain on hold in the near term. However, the MPC of the RBI may have to nudge the repo rate higher in the first half of FY23 if the trajectory of CPI inflation is materially higher than the MPC’s projections of CPI inflation in the monetary policy review in February.

Q) Indian market picked up momentum post Budget after initial US Fed jitters stabilised. What are your views on markets for 2022? What will be the next trigger for markets?

A) The Indian equity market is expected to remain volatile as uncertainties arising from geopolitical tensions and rising international crude oil prices impact market sentiments.

On the domestic front, the state election outcomes too can add to this market volatility.

We believe the next trigger for the market performance could be the ability of the Indian Corporates to offset some of the input cost pressures and register a steady rise in the earnings trajectory.

Q) What is your take on January Mutual Fund data? The mutual fund industry crosses five-crore-SIPs-mark for the first time. What does the trend suggest and where is smart money moving?

A) We welcome the increased usage of institutional investors for investing in the equity markets as it augurs well for retail investors from returns and safety point of view.  

In fact, even we have seen a buoyancy in flows through sustained periodic investments in our ULIP products.

Q) Budget 2022 was focused on boosting growth – do you see sectoral rotation taking place? Which should long term investors focus on?

A) The focus of spending on infrastructure and nation-building as against a direct dole out of cash augurs well through higher economic multipliers on a sustained basis.

This opens up opportunities in the infrastructure and manufacturing sector as well as the banking sector.

Q) Which theme will dominate markets in 2022 – value of growth? We saw a lot of liquidity chasing many mid and small cap stocks in 2020-2021 to tap growth. What are your views?

A) We believe the market's movement will be more stock-specific going forward and the fund performance would depend more upon bottom-up stock-picking skills.

Even in the mid-cap space while many stocks have run up significantly, there exists plenty of opportunity for bottom-up stock picking.

Q) Crude seems to be on the boil. What is your call on commodity market in 2022?

A) There has been an increase in crude oil demand globally as we emerge out of the pandemic with the supply side unable to catch up with this surge in demand.

This coupled with the recent geopolitical tensions has led to a spike in crude oil prices. However, if there is some normalisation in the geo-political scenario, the oil prices could moderate provided the production resumes across OPEC+ as per agreed targets.  

Prices of other commodities too may see some cooling off in the near term while remaining at an elevated level in the medium term as we see a focus on environment and green commodities production, keeping costs above long-term trends.

Q) Given the government's focus on pushing CAPEX are there any sectors poised for re-rating?

A) As highlighted above, the banking and financial space could see some re-rating as credit growth increases.

The infrastructure space also can see some growth as they see a rise in the order book and improved cash flows.

Q) Any new age developing themes that investors can look at for the next 2-3 years? And the ones which one can avoid amid high valuations?

A) The new age themes offer growth through disrupting the traditional models of doing business.

While these can sustain over a more extended period, the current valuations do not provide any scope for disappointment in growth and profitability over the next couple of years.

We would recommend investors be mindful of both these factors before taking a call on stocks in these themes.

(Disclaimer: The views/suggestions/advices expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)