Fundview: India's infrastructure, premium consumer stocks a good bet, says UTI AMC's Lakshmanan

UTI Asset Management

03/06/2024 05:55

MUMBAI, June 3 (Reuters) - India's general elections
will have a limited impact on the stock market, although
infrastructure-related stocks will benefit from policy
continuity, while strong economic growth bodes well for
premium-end consumer companies, said a fund manager of UTI Asset
Management Company.
    Exit polls predict Prime Minister Narendra Modi will win a
third term, sending the stock market to a record high on Monday.
The official results are due Tuesday.
    "Even if the election results are a little different from
the expectations, the stock market may only move for a couple of
days or weeks," said Karthikraj Lakshmanan, senior vice
president and fund manager of equity at UTI Asset Management
Company.
    "Eventually, markets are slaves to earnings. If one looks at
the trend for the last three decades, the best correlation for
markets would be with the earnings trajectory," Lakshmanan said
on Friday.
    UTI AMC manages assets worth 18.48 trillion rupees (about
$222 billion).
    Since 1999, irrespective of the short-term reaction to
election results, India's benchmark Nifty 50  .NSEI  has
advanced over the six subsequent months, data shows.
    The fund manager expects the private sector to now start
contributing to India's growth story.
    The government's focus on manufacturing and capex has helped
the investment cycle so far and now is the time for the private
sector capex to pick up, said Lakshmanan.
    In terms of industries, the power sector could continue to
see healthy growth due to the government's investment cycle, he
said.
    He also expects sustained traction in real estate and other
consumption-linked stocks aimed at premium segments as India's
fast economic growth translates to increased purchasing power,
feeding into the demand for higher-end products.
    "So, we may see those premiumisation trends on the
consumption side to see further traction over the next few
years."
    Lakshmanan expects this to play out, especially in the real
estate sector where the cycles are longer.
    However, he cautions that the above-average valuations in
small-cap  .NIFSMCP100  and mid-cap  .NIFMDCP100  stocks could
spark some volatility.
    "This is a stock picker's market in which the returns will
not just depend on economic stability but also starting
valuations."
 
 ($1 = 83.1160 Indian rupees)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
India's Nifty 50 gained six months from results day for last
five elections    https://reut.rs/3yF5Voe
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 (Reporting by Bharath Rajeswaran in Mumbai; Editing by Savio
D'Souza)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))