Chokkalingam G., chief investment officer at Mumbai-based Centrum Broking Pvt., comments on the outlook for Indian equities after government data showed today factory output expanded at at the slowest pace in 21 months.
Output at factories, utilities and mines rose 3.3 percent from a year earlier, following an 8.8 percent gain in June, the Central Statistical Office said. The median of 26 estimates in a Bloomberg News survey was for a 6.2 percent advance.
The BSE India Sensitive Index lost 431.19, or 2.6 percent, to 16,435.78 at 1:09 p.m. Mumbai, set for the biggest decline since Feb. 24.
“The IIP number is definitely surprising on the negative side but the fact is that the IIP numbers are known for this kind of surprises. Wide fluctuation is very common. I am not worried about it. I don’t think the Reserve Bank of India will increase interest rates now.”
India’s central bank has raised borrowing costs 11 times since the start of 2010 to damp living costs that are rising the fastest among the so-called BRICS countries of Brazil, Russia, India, China and South Africa. The bank’s next policy announcement is due on Sept. 16.
“We should remember the fact that we had very high base last year, so this might be a problem for August IIP as well. In August, corporate income-tax collection, according to media reports, was 30 percent higher from a year earlier and gross personal income-tax was 20 percent higher. Export growth was 40 percent for August. Things should improve going forward.”
Advice to investors:
“We’re optimistic since 18,000 index and have not changed our view. Investors should spread their funds and don’t invest more than 30 percent of the wealth into equity. Go for stocks which have the least global linkages. We have not bought shares of a single software-services company in the past eight months. The strategy should be to buy shares of cash-rich, high dividend-paying companies.”
He recommends Bharat Electronics Ltd., ITC Ltd., Glaxosmithkline Pharmaceuticals Ltd. and JB Chemicals & Pharmaceuticals Ltd.