Utilities, Telecom, Insurance Have More Valuation Comfort, Says Rajesh Bhatia Of ITI AMC
In a 'stock-specific market', Rajesh Bhatia said digital commerce companies in insurance and payments can 'spice up' a portfolio.
Utilities, insurance, large private banks, and telecom companies present greater predictability and valuation comfort in the prevailing uncertain market environment, according to ITI Asset Managment Ltd.'s Rajesh Bhatia.
"This will now be a stock-specific market where you have to pick predictable businesses with comfortable valuations amid uncertainty," Bhatia, the chief investment officer at the brokerage, told NDTV Profit.
He also sees digital commerce companies in insurance and payments as possible additions to "spice up" a portfolio.
The ITI Long Short Equity Fund's strategic long positions are primarily allocated across five key stocks: Bharti Airtel Ltd. (8.71%), HDFC Bank Ltd. (5.95%), Reliance Industries Ltd. (4.45%), SBI Life Insurance Co. (3.29%), and Infosys Ltd. (3.26%).
Besides, the fund's major tactical long positions include ICICI Bank Ltd. (4.11%), Kotak Mahindra Bank Ltd. (2.44%), NTPC Ltd. (1.91%), Marico Ltd. (0.90%), and Power Finance Corp. (0.89%).
ITI AMC manages over Rs 8,000 crore in assets.
As US tariff pressure looms, Bhatia said Indian pharma companies have manufacturing units in the US and are, therefore, less vulnerable.
"I prefer domestic pharma companies because their business model is like consumer companies and, in export, firms that are moving up the value chain. It is difficult to predict the cyclicality of generics," he said.
Earnings Woes
Bhatia also flagged the challenges facing earnings of Indian companies as the country's economic growth slows to multi-year lows and international trade tensions dampen the global outlook.
"We are in a slowing economy with few levers in the GDP accelerating. We are at the peak of the margin cycle, with profit-to-GDP at 6%. For earnings expansion, we need topline growth. If EPS growth is tepid, it is unlikely that we will have PE expansion," he said.
India's GDP growth has remained below 7% for the last three quarters.
He also said the impact on India from US President Donald Trump's tariff policies might be less benign given the fast-paced arrangement for a bilateral trade deal.
