Global markets are witnessing a risk-off phase with global oil prices at over a decade low. In an interview to Bloomberg TV India, Ambit Investment Advisors CEO Andrew Holland says some stability in the commodity prices may be on the cards. He believes that beaten down metal sector could emerge as the dark horse in the days to come. Excerpts:

What is your take on the markets after the early birds came out with their Q3 results? Is the worst over? We are too early because some of the good companies reported Q3 in the beginning and as we go along the result season, it gets worse. But so far so good. Obviously there are going to be certain companies and industries which are benefitting from lower commodity prices—Asian Paints was one. So you are going to see that across many different industries and that’s going to shore up earnings. Not enough upgrades will come quickly but we are towards the bottom of the downgrades and that is the key.

Looking at your portfolio structure, you are bullish on the interest rate sensitives—auto and banking. What’s your analysis of the banking space given that you are negative on two of the biggest banks—one in the private sector and one in the PSU space? We like the banking sector. We think over the course of next one to two years as the economy starts to pick up, the banking sector has to play a part in that and interest rates will continue to fall in India. So it will be good for the banking sector going forward. But in the short term, you still got the problem of bad loans. Outside of HDFC Bank, it’s everywhere. Therefore, you don’t have the conviction that the ratings I am seeing now or the valuations I am seeing now are so cheap because what of the write-offs they have to do and what of the non-performing loans they still have to show to us. So I think maybe it is this quarter or hopefully next quarter and then we can look at the stocks and say this is the right price to buy.

You are not optimistic about the pharma and the IT? Pharma sector should be one where you can sleep at night. But you wake up the next morning and find the regulatory authorities in the US have just slapped a notice or two. So I don’t want to wake up to that. Even if they say we will address it still takes them nine months before they can address those problems and then get it all cleared. So you have all the uncertainties. So why do I need to be there. With IT, I have said a decade ago that the growth is gone. Yes, some of the managements have started to differentiate themselves. But it is still not enough. I still don’t want to be paying nearly 18 times for a single digit growth. It is not working for me. There are more exciting areas in India to make money from.

Take us through the themes that you are betting on right now? The theme that we are looking at the moment is continued interest rate falls throughout the year. If we get that stability in commodities that we are talking about, then we could be relooking at the metal sector again because it has been beaten down a lot and there is some value there. But it may be too early. That could be the dark horse sector, which we need to keep an eye on. For banking within the portfolio, we all realise this has been a fair bit of odds. Within the auto sector, we continue to look at the auto components. But again, because of problems outside of India, it is having an impact in Indian sentiment in terms of the auto parts producers. So we are just holding that from there. We will continue to look at what is spent in the economy and Railways is got to be the sector where government is spending money.

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