Mumbai: Birla Sun Life Asset Management is betting phone companies and carmakers will extend gains next year in the world's best performing major stock market as economic growth spurs spending.
Bharti Airtel and Tata Motors, the owner of Jaguar Land Rover, are among companies Mahesh Patil, who oversees about $3 billion (Dh11 billion) as head of domestic equities at Birla Sun Life in Mumbai, has been buying in the past six months. The stocks are among the top 10 holdings in his biggest stock fund, the data show.
"We are reasonably positive on telecom," Patil said in an interview yesterday, while declining to comment on specific stocks. A scandal involving the government's sale of licenses two years ago at below market prices "will strengthen the incumbents."
Patil is optimistic on growth in India, which Nouriel Roubini, the New York-based economist who predicted the global economic crisis, forecast last week to expand more than China in the next decade. Earnings of companies in the benchmark Bombay Stock Exchange Sensitive Index, or Sensex, may expand by an average 19 percent in the year through March 2012, Citigroup, said in a November 30 report.
The Sensex has climbed 15 per cent this year, the most among key indexes in the world's 10 largest stock markets, as optimism over India's economic growth lured a record amount of foreign funds into the country's equities. Companies in the stock gauge are valued at an average 19.1 times estimated profit, the most among Asia Pacific stock benchmarks.
"We are on a pretty sound wicket," Patil said. "There will be bouts of volatility; it could be global or domestic events. But the medium to long-term outlook is positive."
Patil's Birla Sun Life Frontline Equity Fund has beaten 95 per cent of its peers in the past five years, according to Bloomberg data. His firm has $14.9 billion in assets.
The Sensex has fallen 4.9 per cent from a November 5 peak through last week amid corruption scandals involving the government's issuing of the telecom licenses and some companies handling of loans. Morgan Stanley said on November 25 that the nation's stocks faced their "stiffest test" amid the probes.
A threat by the government to cancel some of the licenses will be "detrimental for the new players,'' Patil said. The government auditor submitted a report to Parliament on the below-market-price sale of licenses on November 16. Bharti's 10 per cent gain since then through December 3 makes it the best performer in that period on the Sensex, which added 0.5 per cent.
Rising salaries and an expanding workforce will boost Indian "discretionary consumption" on products from cars to entertainment, the fund manager said.
