Mumbai: BNP Paribas’ Indian fund unit holds a fifth of its stock funds assets in cash and sees no major triggers to start buying stocks ahead of federal elections due in April-May, a fund manager said on Tuesday.
The firm is not impressed by the three-day spurt, which propelled the BSE benchmark 30-share stock index to its best close since 26 February on Monday, as it sees no fundamental change yet in a slowing domestic economy.
“In this whole bear market, we have seen rallies in between. I think it’s on the same lines,” Srividhya Rajesh, vice president for equity funds at Sundaram BNP Paribas Asset Management, said.
“It is possible that it will last for a few more days but my sense is that the basic trend has not changed because on the fundamental side we are not seeing any major change,” she told Reuters.
Until elections get over “it is a bit difficult for the market to really start moving up on a consistent basis,” the fund manager said, adding her firm was overweight on consumers but remain underweight on most other sectors.
India holds a general election between 16 April and 13 May amid a slowdown in the economy which is expected to expand at its slowest pace in six years in 2008-09, which analyst predict will slow even more next year.
Domestic demand has slumped and exports have dipped sharply and a widening fiscal deficit has many investors worried.
A slowing credit growth and lingering global economic woes were adding to the weak sentiment, Srividhya Rajesh said.
“Near-term things continue to look tough,” she said, adding there was a chance of a recovery in the second half by when she hopes a new government would start formulating policies, banks might revive lending and risk appetite could start returning.
“Things should start looking in the December-quarter.”
Two of her funds hold more than a fourth of the assets as cash and remain underweight on sectors such as auto, energy, capital goods, metal and telecom but are relatively bullish on defensives such as consumer stocks.
“This is probably the only sector where we see some certainty of growth,” said the fund manager, whose firm holds shares such ITC and Britannia Industries.
“Commodity prices have come down, rural income is buoyant and that should help volume growth,” she said, adding pressure on refinery margins was keeping her cautious of energy shares while outlook for capital goods shares remained weak.
“The government capex is the only pillar on which they (capital goods firm) are standing right now and the government spending is also kind of getting curtailed because a lot of the projects are getting delayed,” she said.
Adding to their woes was relatively poor investment sentiment and financing crunch, she said.
“That’s a worry for us,” Srividhya Rajesh added.