Equity funds provide a good entry point currently for aggressive investors, said YES Securities, while acknowledging that the current meltdown in the market would lead to risk averse investors shifting to debt funds in the near term.
According to YES Securities, Indian mutual funds penetration remains significantly lower than the developed and emerging markets but the rising preference for financial savings and customer friendly regulatory measures should lead to India witnessing a healthy AUM (assets under management) growth.
Among its latest calls, the company picks HDFC AMC and Bharti Airtel for the portfolio while excluding L&T, Cochin Shipyard and Ashok Leyland.
Here's the rationale behind its calls:
Inclusion
HDFC AMC: The company says that HDFC AMC, the leader in the MF Industry, has been a preferred brand across financial services spectrum and has a wide distribution reach across channels. “This along with RoE of 35%+ and 35bps RoA AAUM, makes the valuations reasonable,” it said.
Bharti Airtel: YES Securities highlighted that the company is not impacted by the lockdown and that the data usage will continue to rise. “Average revenue per user (ARPU) will continue to inch upwards,” it added.
Exclusion
L&T: Economic activity slowing down will make it tougher for L&T to grow meaningfully, said YES Securities.
Cochin Shipyard: According to YES Securities, the government stake sale overhang will continue.
Ashok Leyland: The company is excluding auto firm Ashok Leyland due to the recent developments around capital allocation.
