In an interview to BusinessLine , S Naren, CIO, ICICI Prudential AMC, with assets under management (AUM) of ₹1.48 lakh crore,, shares his thoughts about the market and the likely impact of global events. Edited excerpts:

Was the market reaction to the RBI decision on June 2 on interest rate cut and possible delay in further rate cuts justified?

With prediction of below normal monsoon and potential rate hike in the US, it was difficult for the RBI to be more aggressive. However, we believe that the economy needs further rate cuts, which have to happen after the monsoon and the US rate hike decision, as in the current high interest rate environment growth may not pick up.

As the first year of NDA government has ended, the euphoria seems to be petering out. Who is to be blamed for that — investors or the market intermediaries?

A stable government is a structural positive for the economy. In a large democracy such as ours, it is important to give a reasonable span of time to the government to see things improve on the ground. The government has taken several positive steps such as the Insurance Bill, the issues regarding gas power plants, the coal auction, etc. The Centre is also focused towards elimination of bottlenecks in the infra space. We believe that India is on the path to increasing growth.

The possible exit of Greece from EU and the hike in the US interest rates are likely to impact the market. What is your advice to investors?

The rate hike in the US due to a strong economy or a Greece exit from EU could result in near-term volatility in global markets. However, it does not affect our market view over the long term. Also, a strong US economy is favourable for global as well as domestic markets.

Investors seem to be depending more on sectors such as IT and pharma for wealth generation. How long will this strategy work?

The outlook for IT and pharma sectors is reasonably good and could deliver moderate returns, going ahead. But the potential for some of the cyclical sectors to deliver better returns as and when the business cycle improves is much larger.

Which sectors are likely to outperform and why?

A cyclical revival would eventually happen. Consequently, cyclical sectors such as infrastructure and financials could do well.

The expected investment in infrastructure has not taken place. How long will key infra-related stocks be able to hold on to their valuations?

Infrastructure, particularly on the power side, has certain stranded assets. While it is a difficult issue to resolve, the government will have to get the stranded assets operational. At this point, it appears to us that 2016-18 could be the period for infrastructure to grow.

The e-commerce space has created so much buzz. Will companies in this sector inject new life into the IPO and secondary markets?

Most of the e-commerce companies are not listed. However, going forward there lies an investment opportunity as the growth of e-commerce coupled with its status as an emerging theme cannot be overlooked.

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