Banks, industrials to drive next surge: Mirae’s Chadha

“As we get clarity on vaccine or clarity on a definite time frame for this virus to end or mitigate in terms of its negative impact, we are seeing Covid losers or the good companies in other sectors — cyclicals, etc, now bounce back very quickly,”...

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With eyes on economic recovery bets, Chadha is also bullish on the real estate sector that currently has the backing of some positive factors such as better affordability, and low interest rates.
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Mumbai: Cyclical sectors in India such as banks and industrials will take the market higher over the next few months as sectors and stocks which have led the rally so far take a breather, said Rahul Chadha, chief investment officer at Mirae Asset Global Investments which has $162 billion in assets under management globally.

“As we get clarity on vaccine or clarity on a definite time frame for this virus to end or mitigate in terms of its negative impact, we are seeing Covid losers or the good companies in other sectors — cyclicals, etc, now bounce back very quickly,” said Hong Kong-based Chadha in an interview with ET.

“You will see a rotation from names which have done well and IT which has done well will take a breather for probably the next three or six months. Reliance which has done well will take a breather for three or six months. The Covid losers, which are industrials and cyclicals or the banks in India which are still below their February levels would take this market up,” said Chadha.


Indian markets have rallied more than 70% from their March lows. Reliance Industries has been the biggest contributor to the market rally followed by Infosys, HDFC Bank, TCS and Kotak Mahindra Bank.

While some banks have rallied sharply, overall, the sector underperformed during the market rally since March. However, the better-than-expected September quarter earnings coupled with attractive valuations have made investors stock up on banking stocks.

“That is the most attractive sector for us from a six to nine months perspective. We have been positively surprised by the results in the September quarter whereas these companies have given a positive surprise on lower than expected delinquencies etc.,” he said.
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Chadha, who has been with Mirae Asset Global since 2006, said that within emerging markets the bias is in favour of South Korea and India as they have been negatively impacted by the coronavirus pandemic.

“India would be our biggest overweight. Within the region, the two markets which we like are South Korea and India in terms of our overweight,” said Chadha. “Both these markets have reasonable upside on valuations and the growth recovery,” said Chadha. He believes there will be more fiscal support from governments in the Eurozone and the US going ahead.

With eyes on economic recovery bets, Chadha is also bullish on the real estate sector that currently has the backing of some positive factors such as better affordability, and low interest rates.

“Our channel checks with people on the ground have also indicated a sizable interest in buying a new house etc. The sector is under-represented in benchmarks,” said Chadha. “There is a solid backdrop for the sector to grow from here. As the economy recovers, this is a good reflation proxy,” he said.
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