Noriko Kuroki, client portfolio manager-emerging markets equity at JPMorgan Asset Management continues to see good value in Indian equities. However, she advises against adding positions aggressively at this juncture. She says investors should rather watch the election outcome as betting on it could prove to be futile.
Kuroki is positive on consumer discretionary, auto and IT services.
Below is the transcript of Noriko Kuroki interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy
Sonia: India has attracted the highest amount of flows amongst the Fragile 5 but do you think that trend could continue?
A: India has had a good run up to elections but we still see good value in Indian equities perhaps not the time to add aggressively at this stage because India has had a good run as I said. We were adding aggressively in Q3 last year when India saw a sharp decline in both currencies and the markets. We are still happy with that the names we hold in our portfolios but from now, I think what is more important is what sort of government we are going to see after the elections, what sort of policy initiatives we can expect from the new government. So for now, we are watching closely the election outcome and importantly what sort of policy measures the new government is going to announce.
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Latha: Should we assume that from now, up until Friday, when the actual numbers come in, people like you will rather not participate but just wait and watch?
A: Yes, history tells us betting on the election is rather a futile outcome. In politics we are not expert on politics, we look at companies, and we look at fundamentals of the company's economic developments. So I think it is too risky to bet one way or the other just for the outcome of the elections, we would rather focus on what we are better equipped i.e. looking up companies, we are long-term holders of companies. So short-term noises, we try to ignore but look at the long-term fundamentals and this election is very important for India's long-term future. So, we are very much interested in the outcome but rather than taking short-term actions, we would rather stay and watch for now.
Sonia: You just mentioned a while back that you aggressively bought some stocks in the rally from September to now, what are those stocks that you are holding on to?
A: We like consumer discretionary and also IT service sector. So auto names or consumer discretionary names are more attractively valued than consumer staples. We also like the IT software sector because we think that the IT outsourcing is still at an early stage globally. So these blue-chip Indian companies can continue to grow for many years to come. So that is a kind of structural positive data we have for the sector.
Latha: For the past since September probably when the Fragile 5 currencies started stabilising and improving, the trade has been with cyclical stocks and away from the dollar stocks, for one thing dollar was getting cheaper vis-à-vis the Indian rupee today it is at some kind of a record low versus the rupee, would you therefore think or prefer a rotational trade away from the dollar exposed trades to the rupee exposed trades to the Indian economy, cyclical exposed trades?
A: Interesting because we look at the Indian currency from a longer-term horizon. So we tend to focus more on five-years rather than just a nine months. Indian rupee got cheap when they got sold off aggressively and it is -- even after the rebound -- still one of the cheaper currencies in EM space. So we are comfortable where the currency is right now. We see more upside in the currency.
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