ICICI Prudential Mutual Fund’s Fund Manager & Head of Research Anish Tawakley speaks to Paisabazaar on why investors should focus on manufacturing and export-oriented companies as a theme.
Anish Tawakley is the Fund Manager of the newly-launched ICICI Prudential Manufacture in India Fund.
Q- What makes you bullish on manufacturing in India?
Ans– India is the sixth largest economy by nominal GDP and one of the fastest growing economies in terms of GDP growth. We believe, as the economy develops, there will be increased construction activity, by way of building houses to meet the housing needs of the masses.
In order to meet this increased demand, goods could either be imported or domestically produced. Since the Current Account Deficit (CAD) needs to be contained, this demand created is likely to be met by domestic production. This is where manufacturing in India can come to play.
Q- Services in India account for about 54% of GDP. Why should investors ignore this sector in favour of manufacturing?
Ans– As mentioned earlier, CAD needs to be contained. Till FY10, IT services & exports grew which helped to maintain Current Account in good shape. Since FY10, IT services & exports slowed down mainly on account of the fact that Indian companies are already a major player in global IT services market and any incremental gain in their market share is not easy to come by. So going forward it will be important for domestic manufacturing to pick up – to both contain our import bill and supplement our services exports.
Q- Are the upcoming elections a major risk for potential investors in this fund? Governments affect a number of manufacturing-related factors like labour laws and tax rates.
Ans– Elections do create short-term market volatility, but they are also an opportunity to buy into fundamentally strong companies. So, we would consider investing in companies with strong earnings visibility and ability to survive such volatile times. The moot point here is that irrespective of election times, the needs of the masses in terms of housing and manufactured goods will sustain, which need to be met by domestic manufacturing.
Q- The rupee has depreciated significantly this year. Do you see further depreciation as a major positive factor for manufacturing companies, especially in terms of exports?
Ans– Owing to currency depreciation, domestic manufacturing becomes more competitive. High oil prices and an expanding CAD is an environment which helps exporters and import substitution companies.
Q- Although this fund is thematic, you are using the S&P BSE 500 as a benchmark. Any particular reason for this?
Ans– The Scheme has a multicap approach. So, the S&P BSE 500 is the closest available index for the requirement.
Q- What proportion of an investor’s portfolio should be in this type of fund?
Ans– Since this is a thematic Scheme, we believe investors should have an investment horizon of at least five years, so that the theme plays out. In terms of one’s portfolio proportion, we recommend investors to consult a financial advisor so that one’s financial goals and investments are aligned.
Date: 04 OCT 2018