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Majority FIIs not bothered about political stability, says UBS Securities
"It looks like market is wanting BJP to win Karnataka elections and so have rallied," said Gautam Chhaochharia, Managing Director and Head-India Research, UBS Securities.
"However, beyond a couple of days this political significance will lose its value and other factors like monsoon, earnings, global macro headwinds and the likely support to the rural economy by the government might come to the fore," said Chhaochharia.
When asked if foreign institutional investors (FII) would relook at India position if BJP-led government win in Karnataka, he said the market is expecting BJP and JD (S) to form an alliance, which is still not sure.
Chhaochharia said large part of FIIs is not bothered about the political stability or risk of prime minister Narendra Modi not coming back next year and that worry is more limited to investors in Mumbai and some select investors in Asia.
"Locally, the liquidity versus macro headwind debate will continue,” Chhaochharia added.
Talking sector specific, he said when they look at rural ideas both in terms of leveraged to rural growth, as well as where the stock multiples are trading at and the performance history.
Therefore, the house would look at select names in financials (private banks with retail liability franchise including corporate lending), non-banking finance companies (NBFC), property, autos and is overweight on information technology services.
With regards to NBFCs, he said the big headwind is rising interest rates. If rise is big, it will impact them, but little bit rise won’t have a impact.
"Look for NBFCs, where yields are higher. Also, small banks looking at micro finance, look well placed because of visibility in growth rates," he added.
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