‘Market to continue its uptrend, but no triggers in sight’

T P Raman, managing director of Sundaram BNP Paribas Asset Management Co, believes in the principle of analysis and more analysis before making any investment. Raman, who has been associated with the company since its inception in July 1996, is bullish on the India story, too. In an interview to DNA, he said number crunching alone can help investors reap maximum benefits and that the winter session of Parliament could throw up some concrete figures. Excerpts:

What are your expectations from the winter session of Parliament?
It would be very nice if concrete programmes on infrastructure spending take shape in this session. It would help in knowing the budgetary exposure to these projects and getting hold of concrete numbers would be a big boost. At present, there is nothing tangible beyond talks of rural upliftment and spending on energy. Even in energy, all significant moves have been from the private sector and little has been heard from the government.

When do you expect to hear good news on the global basis?
The good news is that there is no bad news. The packages by the government are working and lack of growth is being arrested. By 2011-2012, we should see positive GDP for most of the countries. The December and March quarters should be much better than the previous ones.

Does it worry you that there have been reports of collapsing banks even as the recovery seems underway?
I believe that if there was any more major bad news, then it would have surfaced by now. There are reports of a hundred banks failing, mostly with an exposure to mortgages and personal loan, but it has not impacted the markets in a big way. One must take heart from the fact that major banks have survived.

Markets are near their highs for the year. Do you see any correction?
There will be corrections from time to time, but markets should continue the upward trajectory. There does not seem to be any trigger for major moves either way. There is a lot of liquidity, which is likely to help the markets. Inter-regional allocation changes will continue to happen with money perhaps moving from some Asian markets to India. There is expected to be a distinct forward movement.

What is driving the sugar sector?
The industry should do well in the medium term. It is not possible to increase acreage overnight, and globally, the crop is being used for fulfilling energy requirements. Domestically, monsoons have been erratic, which will have an effect on areas that are not well irrigated. Prices are going to go up since there is a supply constraint.

What is your outlook on the metal sector?
It is difficult to get a view on metals as the commodity sector is subject to speculation, which might affect prices as well. If one had a concrete idea of the kind of plans that governments and companies have, there would be some clarity on demand. The likely amount of consumption, because of various projects in India and China, maybe known but we have no real idea of how consumption might pick up in Europe and the US.

Off late, metal prices have hardened. There is supply, which is expected to come from China and India, but demand will be a key driver in this segment as well. There are no major mining stories that one has heard of and no new mines being explored with a major capital expenditure plan. With a demand-supply mismatch, there would be some movement in the sector.

How is low credit offtake affecting capital expenditure plans?
There are capital expenditure plans in place for cement, steel and the auto sectors. Most of the industry is looking at rates below 10% for credit offtake to begin. Otherwise, it does not make sense for them to begin doing so and one can see that at 12-14%, they are disinclined. Financing is happening through equity and short-term debt.

Banks, as a whole, don’t care about the absolute rate of interest charged as long as their spreads are maintained. Deposits rates have to be headed lower and one will likely see more borrowing once that happens.

How would you define your personal investment style?
I believe in informed investing. Pick up a theme and then scout for companies. It is important to go deep, get data, analyse it and act on it. The exception would be in the smallcap or the mid-cap sector, which may have good standalone stories to tell. The small-cap sector is especially under-researched, so one can look at that as well. Overall, it is necessary to stick to a plan. Warren Buffet, for example, crunches a lot of numbers but his investments follow a certain trend. He will invest in long-term stories like a Washington Post or a Gillette.