Even after gaining 8 per cent in the past four months, fund managers expect the rupee to keep rising on the back of strong foreign inflows, according to the IIFL Fund Manager Survey conducted in June. Almost 80 per cent of fund managers surveyed by the brokerage expect the rupee to strengthen and stabilise at around 46 by the end of this year. Forty-five per cent of fund managers also expected the yield on 10- year government paper to rise by another 50 basis points.
Crude range-bound
Almost 50 per cent of fund managers surveyed believe crude prices will remain range-bound at $60-70 a barrel until the end of this calendar year. Persistent concerns about the recovery in the global economy being slower than expected are expected to keep prices subdued. Still, 10 per cent of respondents said they believe crude prices could up to $80-90 a barrel.
PSU banks the flavour
The financial sector seems to have found favour with most fund managers, with a whopping 86 per cent of them overweight on the sector. An improving economic environment and better-than-expected corporate performance has allayed bad debt worries for banks, the report says.
Within financials, fund managers are more bullish on PSU banks. Capital goods stocks came in second-favourites with 73 per cent of fund managers overweight on the sector over expectations of higher government spending on infrastructure.
Large-caps such as BHEL and HDFC Bank were the most preferred, overweight stocks in the portfolios of the respondents, while Voltas and Aurobindo Pharma emerged as the preEmerging
ferred choices in the mid-cap space. Interestingly, fund managers are most pessimistic on software services and energy, with 55 per cent and 41 per cent of respondents underweight on each sector respectively. The appreciating rupee and rally in commodities beyond fundamental justification has led to pessimism among fund managers for both. Also, as energy stocks have higher weights on the benchmark Nifty index, most funds look underweight on the sector. Views are mixed on the fast- moving consumer goods sector: while 27 per cent of fund managers were underweight, about 32 per cent were overweight. The split highlights the difference in approach towards defensive stocks and evidently, some fund managers have pared exposure to these stocks to take advantage of the upturn in the market, IIFL noted.
Contrarian picks
In its previous survey in February, IIFL had suggested a basket of contrarian bets which included Tata Motors, Bajaj Auto, DLF, Tata Steel and Sterlite Industries. This basket outperformed the benchmark by 55 per cent, handing in returns of 122 per cent. This time around too, IIFL is sticking to its contrarian strategy with Reliance Industries, Wipro, DLF, Colgate and Jindal Steel & Power making up its top picks.
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