JP Morgan Asset Management India is bullish on stocks of private sector banks that are better placed than their public sector peers in terms of asset quality, said Nandkumar Surti, chief investment officer, who manages assets worth Rs 4,772 crore.
"On the financial sector side, private banks are what we are overweight on, particularly because they are not seeing the kind of pressure that public sector banks are seeing, especially on their NPA side," he said. The fund house has increased exposure to private banks from 9.89% in August to 10.19% at the end of October.
In the quarter ended September, the country's largest lender, State Bank of India, posted 12% decline in net profit amid a steep rise in bad loans. However, the two largest private sector banks, ICICI Bank and HDFC Bank, posted 22% and 31% increase in net profit for the second quarter and also improved their bad loan portfolio.
The fund house is bullish on discretionary consumption sector stocks such as two-wheelers and paints, while it remains averse to metal, telecom and most state-run firms.
Going ahead, two key factors to look out for will be the Reserve Bank of India's rate stance in its December policy review and global commodity prices, said Surti.
"The more important factor would be indication from the Reserve Bank of India that monetary tightening is nearing a pause and if we see some meaningful correction in global commodity prices and reforms on the policy front those could be triggers for a re-rating of markets," he said.
"The focus on fixed income is because the rates have continuously risen from the low of 4.75% to the current repo rate at 8.50%. Investors have found better investment opportunities on the fixed income side and obviously we have also tried to exploit that," he said.
Source BY dialabank.com
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