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Sensibly spot debt-ridden cos to make a killing: S Naren

The companies which have borrowed are all set to become big gainers as interest rate cycle comes down, says S Naren, CIO-Equities, ICICI Prudential AMC.

The companies which have borrowed are all set to become big gainers as interest rate cycle comes down, says S Naren, CIO-Equities, ICICI Prudential AMC. “the debt ridden companies are the best opportunities because we do not think this is a last rate cut; there are many more rate cuts possible particularly if crude continues to remain at this range,” he told CNBC-TV18 in an interview.

Below is the transcript of S Naren’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.

Anuj: What is your advice now to retail investors at this point – stay invested, add more or look for a correction to reenter the market?

A: From an economic cycle point of view we are not anywhere close to economic cycle top – that should be about three-four years from now. So there is huge scope for a long-term investor. However, for a trader it is a very difficult call at this point of time because we have seen a very good rally in the market and we have had surprise positive rate cut from the RBI. So it’s much more difficult to talk from a short-term point of view but from a long-term point of view we are very far off from economic cycle top.

Ekta: If you had to take fresh positions into certain sectors or stocks at this point in time, which one would it be and which one would you advice profit booking in?

A: At this point of time the companies which are borrowed who will become big gainers as interest rate cycle comes down. They have done very badly relative to everybody else. So the scope to do good quality research and buy the leveraged companies is where the biggest opportunity lies. We have to remember that these leverage companies are not necessarily the best financials or the best balance sheets, so it requires fair amount of research to buy them but that is where the biggest upside exists.

Anuj: We have seen a big rally now in domestic stocks, infrastructure, cement, capital goods. Today we have seen all the debt ridden companies do well. Do you think that is the space that will make a lot of money this year?

A: If you do the right research, the debt ridden companies are the best opportunities because we do not think this is a last rate cut; there are many more rate cuts possible particularly if crude continues to remain at this range. So consequently the biggest opportunities in doing good quality research on the debt ridden companies.

Q Expense Ratio is not of utmost importance for:

  • Equity fund
  • Balanced fund

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