​Continue to prefer private banks in banking space: Mahesh Patil

ET Now: The fund has done well against the benchmark. What has been your portfolio strategy over the last three months with regards to this fund?

Mahesh Patil: We have been able to play this sector theme rotation pretty well. So at the beginning of the year we were slightly overweight on some of these domestic cyclicals like banking, financials, and capital goods.

In the recent past we have reduced the sector overweights and aligned the portfolios in line with the benchmark at the sector level because the valuation differential is no longer there.

Our focus is again on individual stock picking and the combination of top down and smart stock picking has resulted in the fund outperforming the benchmark in the last one year as well as on a three-year basis with significant margin.


ET Now: Your top holdings include large private banks like ICICI Bank, but the question is: what is the view on midsized private banks and possibly even PSU banks?

Mahesh Patil: In the banking sector we continue to prefer the private sector banks. One year back we were predominantly in the retail private sector banks. Within the midcap banks we prefer the old private sector banks compared to the PSU banks which we feel are still facing asset quality issues. So old private sector banks which are well capitalised and have better return ratios have been our strategy on the banking side.

ET Now: What about the view on large caps ahead of course the big earnings that are going to start off by the end of this week? What is the view on large cap and midcap IT?

Mahesh Patil: The IT sector is one of our preferred sectors because we expect a steady growth over there. Most of the companies should report volume growth of around 14% to 16% and even the new order pipeline deal flows are looking pretty healthy.

There were fears that the rupee would appreciate, but recent dollar strengthening has helped and that would also contribute favourably in terms of some upgrades. Currently analysts are anchored at around Rs 60 to the dollar. So if the rupee remains well above 60 levels, then one can even see some upgrades coming in the IT sector.

ET Now: What is the view on large cap and midcap IT and what are you betting amongst some of the other sectors, say autos?

Mahesh Patil: The auto sector has done well in the last three months, especially after the elections. We have seen consumer confidence coming back.

Going forward, we expect that growth to sustain and there are certain margin levers some of these companies have which should benefit. Given that we expect the OEMs both in the four wheelers as well as two wheelers to show decent earnings growth.

A lot of auto ancillary companies have been able to tap the export market.


ET Now: What is the focus within the infra sector? What have you been buying under this fund in that space?

Mahesh Patil: In the infrastructure sector, we have been mainly focussed on some of the larger names, companies with strong balance sheets which we believe will be able to really take advantage of the order inflows which will come in.

Companies that have been able to rely on orders overseas have been able to do well. So, focus on the larger cap names and companies with strong balance sheets in this space. At this point, it will be a slightly medium to long-term call in infrastructure sector space.


ET Now: What is your view on defensives at this point, in pharma, FMCG which have done very well so far into the year as well?

Mahesh Patil: We prefer pharmaceuticals over FMCG. The recent run-up in the pharma space has made the stocks a bit expensive. Even the midcap pharma is quoting at multiples of around 18 to 9 PE one year forward.

But pharma has a structural long-term opportunity and there are possibilities to tap into the US generic space. The product pipeline for some of the large leading pharma companies also looks pretty good to sustain growth of anywhere between 15% and 20% over the next couple of years.