Kotak Life Insurance bets on India's investment cycle: Kanawala

FILE PHOTO: An employee counts currency notes at a cash counter inside a bank in Agartala·Reuters
Sethuraman N R
2-min read

By Sethuraman N R

BENGALURU (Reuters) - Kotak Life Insurance is betting on sectors such as defence, capital goods, engineering, financials and specialty chemicals as India's investment cycle picks up, and the government pushes "import substitution" schemes to promote local businesses, said Hemant Kanawala, its head of equity investments.

Kanawala told Reuters his funds are "overweight" on banks, capital goods and chemicals, and "underweight" on utilities and oil & gas.

"We will bet on investment as a theme," said Kanawala, who manages funds with assets under management worth 105 billion rupees.

"The other longer, broader theme which we are playing is wherever government is trying to promote import substitution," he said, adding defence is one such sector.

India's defence production rose more than 12% last fiscal year and crossed the 1 trillion rupee threshold for the first time, as the country tries to reduce its reliance on imports from countries such as Russia.

Strong macroeconomic fundamentals and a pick-up in the investment cycle are making bets on the domestic markets attractive, but a challenging external environment and the possibility of a weak monsoon remain imminent risks, he said.

The benchmark S&P BSE Sensex hit a record high on Wednesday and has gained over 4% so far this year, while the blue-chip Nifty 50 index, which is also up about 4%, is inches away from hitting all-time highs.

"Over the next six to 12 months, earnings will continue to grow, so we are not seeing high risk from the India perspective," Kanawala said.

Investors should, however, factor in growth risks emerging out of the United States, Europe and China in the next six months, he warned.

"We are not saying to sell aggressively today because this risk may not play out. But, things are looking difficult. So, you have to be ready for a correction on the back of development in the external environment," he said.

Kanawala's concerns regarding India were tied to the lack of clear signals on the recovery in rural consumption and the larger ramifications of any potential monsoon deficit.

(Reporting by Sethuraman NR in Bengaluru; Editing by Dhanya Skariachan and Eileen Soreng)