Satish Ramanathan, CIO-Equity at JM Financial Mutual Fund
Satish Ramanathan, CIO-Equity at JM Financial Mutual Fund, shared his views on the Indian economy, the stock market, and various sectors.
PSU banks: Ramanathan believes that PSU banks are attractively valued and have overcome their asset quality issues. He also noted that they are diversifying their loan book to access retail loans. However, he highlighted the challenge of an older staff and excessive rules which dampen creativity and agility.
Textile sector: Ramanathan is bullish on the textile sector in the medium to long term. He cited India’s large output of cotton and number of spinning mills, as well as its favorable demographics, as reasons for his optimism. He also noted that India has a large share in the home textile market and could gain market share in other segments as well.
Auto and auto ancillary segment: Ramanathan divided the auto and auto ancillary segment into three segments: (1) businesses not impacted by electric vehicles (EVs); (2) businesses negatively impacted by EVs; and (3) ancillary companies supplying to the EV chain and gaining traction. He believes that India could potentially gain market share in legacy products and spares, as well as in the EV chain.
US recession: Ramanathan acknowledged the risk of a recession in the US next calendar year. He pointed to cracks appearing in the commercial real estate market, consumer loans segment, and the private credit/equity space. He warned that a snowballing of these issues could lead to a sharp slowdown.
Federal Reserve: Ramanathan expects the Federal Reserve to be measured in its interest rate hikes from here on. He noted that inflation is on the mend and that there may be other risks to the economy if rates move up higher than current levels. He also highlighted the challenges faced by smaller banks in attracting deposits.
Specialty chemicals: Ramanathan believes that Indian speciality chemical companies could continue to remain on a growth trajectory. He cited the need to localize a lot of products that are currently being imported as a reason for his optimism. However, he noted that speciality chemical companies are undergoing a midcycle correction as regards inventories and prices. He also highlighted the risk of margins remaining flat for some time.
Broader markets and largecaps: Ramanathan believes that midcaps have traditionally been more volatile due to higher retail participation. He also noted that there is nervousness on valuations as well. As a result, he believes that a larger allocation to largecaps may be appropriate for now.
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