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Notes from the Kotak Mutual Fund Conference Call

Attended the Kotak Mutual Fund Conference Call today where Nilesh Shah,MD,Kotak Mutual Fund spoke on the Market Outlook.

Key takeaways:

  • Major fears/overhangs on the market
    • Farm Loan Waivers-Feels the impact won’t be much despite the scary headline numbers
    • NPAs-Feels a beginning has been made to end this problem.But there is a long way to go.Narrated a humorous anecdote where the MD of a PSU Bank told him: “If RBI wants me to make so much provisions, they should provide the capital also else they should run the Bank”
    • Geo-Political Risks- Border fight with China & North Korea may impact EM flows
    • MSCI Index Changes-Addition of Chinese mainland stocks can reduce India’s weightage impacting ETF flows
  • On GST
    • Feels the initial implementation has been very smooth
    • Q1 will be impacted as companies have reduced their inventories, compensated dealers and cut prices
  • On interest rates
    • Feels markets have priced in a rate cut
    • Expects RBI to cut rates by 25 bps in August 2017
  • On political risk
    • Feels markets have priced in a Modi re-election in 2019
    • Expects BJP to continue winning in 2017 Karnataka & Gujarat elections
  • On fund flows
    • Continues to be strong-Kotak has crossed 1L Crores AUM this month
    • Says an IPO can be fully subscribed by going to Bandra-Kurla,Lower Parel and Nariman Point (Different locations in Mumbai) .No need to go to New York,London and Singapore !
  • Believes 3 Themes are playing out
    • Movement from Unorganized to Organized
    • Movement from Physical Savings to Financial Savings
    • Govt spending on Infrastructure
  • Bullish on the following Sectors:
    • Cement/Capital Goods/Autos/Auto Components
    • Private Sector Banks
    • Consumer NBFCs
  • Bearish on the following Sectors:
    • Export Based Companies (Including IT/Pharma)
    • Telecom
    • Commodities
    • Real Estate

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