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IDBI Fortis likes builders, banks; shuns telecom

IDBI Fortis likes builders, banks; shuns telecom
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First Published: Fri, Aug 28 2009. 04 38 PM IST
Updated: Fri, Aug 28 2009. 04 38 PM IST
Mumbai: Indian corporate earnings growth will rebound strongly in 2010-11 driven by demand pick-up as economic growth revives, benefiting sectors such as construction and financials the most, a top insurance fund manager said.
Aneesh Srivastava, chief investment officer of IDBI Fortis Life Insurance Co, said the government’s focus on infrastructure would mean a steady increase in order books for construction firms, while bank credit growth would pick up in six months.
“As far as India is concerned, December quarter will be the turning point,” said Srivastava, who manages Rs8 billion for the joint venture between Belgian insurance group Fortis and Indian banks IDBI Bank and Federal Bank.
The fund manager sees a 5% earnings growth for firms in BSE 30-share index in 2009-10 and 17% the next fiscal year with possibility of upward revisions.
He identified construction firms as the major beneficiary of the rebound, helped by a push from the newly-elected government seen focusing on infrastructure.
“Top line is assured by the government for the next few years,” said Srivastava, who holds shares such as IVRCL Infrastructure & Projects and Indian engineering and construction firm Larsen & Toubro.
The fund has holdings in Jaiprakash Associates and Patel Engineering, which form part of a sector that is seen benefiting from ample liquidity and growing investor confidence as global economy revives, he added.
“My sense is that worse is certainly behind us,” he told Reuters in an interview.
Second-quarter growth in major Asian economies such as China, Hong Kong and Singapore was better than expected, while Germany and France made a surprise return to economic growth, ending their recessions earlier than many expected.
Meanwhile, the United States, hit by its worst recession in almost eight decades, is also showing signs of life with the number of workers filing new claims for jobless benefits falling last week and those collecting long-term unemployment benefits dropping to the lowest level since April.
US housing sector is also on the mend with newly built homes being sold at the fastest pace in July in 10 months and sales of existing homes at the fastest pace in almost two years.
Likes banks, wary of telecom
The fund manager is also betting on banks such as top lender State Bank of India, private sector ICICI Bank and HDFC Bank on hopes credit growth will pick up.
He said loan growth, hovering around 15-16%, will inch closer to central bank’s target of 20% in six months on robust demand from sectors such as power and infrastructure. Besides, banks will also improve their net interest margins (NIMs) as bulk of their high-cost deposits mature.
“From September quarter onwards you will see NIM expansion,” he said, adding his portfolios were underweight on consumer goods shares and government regulated oil and gas firms.
The fund manager is also shying away from telecom firms given intense competition leading to price wars and concerns incremental growth mainly in rural areas might not be as profitable as that from urban subscribers.
“Best part of telecom is over actually,” he said.
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First Published: Fri, Aug 28 2009. 04 38 PM IST
More Topics: IDBI Fortis | Real Estaet | Builders | Credit | Telecom |