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Tawakley said he would never recommend entering equities with a one-year outlook. In his view, a minimum three-year perspective is necessary.
“We have been once the first to say that small cap is an area of concern, and that continues to be the case. The fact that there are so many promoters diluting, etc. reinforces our view that that segment does not offer good risk return trade off,” he said.
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After the exceptional returns seen recently, Tawakley expects moderate returns in 2025.
The fund house believes discretionary should pick up if the economy regains momentum. The focus would be on the domestic, cyclical sectors, including cement, automobiles, capital goods, and banks.
However, he is cautious on the banking sector, and prefers only larger banks.
FMCG, metals, IT and unsecured lending is a clear avoid for ICICI Pru MF. For FMCG challenges are more internal and not macro.
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“The problem in my view with the FMCG companies is they are over earning. Their margins are too high, and therefore they have to come to terms with the reality. So there need to be earnings downgrades in the FMCG sector. As these companies take some margin correction, and invest more in the business,” he said.
They are also cautious about ferrous metals, as there is a belief that China’s demand, which accounts for half of global demand, is unlikely to recover.
IT is not seen as particularly attractive, especially after the recent rise in the dollar.
Consumer unsecured lending is also considered a clear avoid for them.
