‘Govt has to put the FII tax confusion to rest’

MAHESH PATIL , co-chief investment officer, equities, Birla Sun Life Asset Management, believes Indian equities are still in a bull run despite the recent 10 per cent correction. He tells Chandan Kishore Kant the market will benefit from more government spending, interest rate transmission and steady rupee depreciation. Edited excerpts: could come from a rate increase by the US Fed (central bank). There could be a short-term negative reaction leading to the event or after the event. Currently, the managers of emerging market funds are overweight India and underweight China. If there is an increase in weight of China local shares in the MSCI indices, it might lead to increased allocation to China. Locally, blocking of bills in the Rajya Sabha is a significant risk to the efforts the government is putting to restart the investment cycle. This could be seen as a negative. Additionally, we risk a market correction if earnings growth doesn’t come even after two quarters. Has our market become more stock-specific or is there room for sectoral plays? The recent correction has punished some stocks to the extent of 30-50 per cent, as they lacked in the fundamentals. It has also rewarded companies that are doing well. Hence, the market has become stock-specific. We are looking for companies with a credible business model, with sustainable competitive advantage, good balance sheets and pricing power. We have no major tilt in any particular sector but are stockspecific within sectors. There are concerns about the rural economy. Against this backdrop which sectors would you like to avoid? The rural economy did well from 2010-13. However, due to a combination of lower increases in the government's minimum support price, lower wage growth, reduced spending on the rural job guarantee programme, falling gold prices and inclement weather, the rural economy has come under severe strain. Agricultural gross domestic product grew only 1.1 per cent in FY15. We believe the strain on the rural economy would remain and, hence, would be cautious on two-wheelers, tractors, consumer staples, rural lending companies and state-owned banks.