Prefer global cyclical stocks vs domestic cyclicals: Nippon India’s Manish Gunwani

“The baseline case for us still remains that the global economy is recovering and we are a part of a cyclical bull market. The minor headwind I see is the strength in the dollar. One would have hoped that the dollar is weaker but looks like the US fiscal stimulus is of a magnitude that is still making the dollar outperform. I think we are still part of a good bull market but there are a couple of red flags and we can’t deny that,” Gunwani said.

Gunwani said he did not see much value in FMCG stocks.

“On a one year basis they have underperformed not only in absolute terms but related to the market or related to the cyclical sector, they have obviously underperformed. But we still in aggregate don’t see too much value there. Also what we are seeing is that there is a fair amount of competition coming from different parts of the industry so whether you see electricals or paints a lot of the big companies are moving into each other’s territory so overall not seeing too much of great reason to buy some of these high-quality names yet,” he said.

He remains cautious on the auto sector.

“We are generally being away from two-wheeler and four-wheeler OEMs. The space where we have a big exposure is the commercial vehicle (CV) space actually because we think that space is a pure cycle in terms of playing the economic recovery. Within over next 2-3 years, volumes will come back and also we see that the expectations are quite moderate. The CV space, its financiers, its auto ancillaries related to CV are interesting,” Gunwani said.

On pharma he said, “It is coming back into a value zone a bit but we still not super excited. Stocks have corrected especially on a relative term they have underperformed last 6-9 months, it is becoming attractive but we are not there yet.”

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