Gold to remain a long-term strategic asset amid geopolitical shifts: Manishi Raychaudhuri

Synopsis

Manishi Raychaudhuri favors private sector banks due to potential consumption and investment rebound, alongside consumer discretionary stocks benefiting from tax cuts. Industrials, boosted by infrastructure spending and defense equipment manufacturing, are also promising. While cautious about generics, he sees potential in domestic healthcare, particularly hospitals and diagnostics, driven by increasing urban affluence.

"In all these sectors, investors would have to be very careful about the valuations they pay, that is the kind of final message I would like to leave with our viewers," says Manishi Raychaudhuri, Veteran Investor In Asian Equities.

So, I just wanted to have your view on the FIIs, and you just highlighted the fact that the FIIs, the number actually is quite volatile on a day-to-day basis, but some improvement indeed there. But in terms of the sectors, which sectors do you believe are expected to do well? Give us some sense there because the last time you connected with us, you did talk about the financial space, how the pharma space is picking up and along with that the IT, that is still underway going some of the kind of news flow that are impacting from the US markets in terms of discretionary spending. Give us some sense that within sectors what are your preferred bets.
Manishi Raychaudhuri: So, we continue to prefer the private sector banks in India because if we do have a rebound in consumption and investments, that would have to be financed by the banking sector largely and within the banking sector, the private sector banks are gaining market share.

They have way better technological platform and much better asset quality on their balance sheets. We are also positive on the consumer discretionaries. We are gradually seeing the effect of tax cuts. Going forward we are going to see the impact of more money in the hands of the government workers. And the third thing would possibly be industrials.

As a consequence of the infrastructure spending coming back and I would possibly include some of the defence equipment manufacturers in this same bracket.

So, these are the three buckets, that three silos that we are positive on. I would also briefly talk about healthcare. There is a lot of uncertainty about the generics manufacturers, but if you look at domestic healthcare, particularly the hospital and diagnostic chains, the impact of increased urban affluence would flow through to that sector as well.

Also, want to get your take on crude and crude beneficiaries. We have seen a little bit of a jump up coming in in WTI and Brent. Give us a sense of what you are making of some of these crude beneficiary sectors like paints or aviation. What is your outlook on these lines?
Manishi Raychaudhuri: The problem with some of these sectors that you talked about, paints for example, if you want to play the market leaders and that is basically the strategy that we are adopting, the market leaders which have pricing power, in this sector the market leaders are very highly, very expensively priced. There is hardly any margin of error.

Aviation is something that we like because there is an impact of better domestic consumption and money flowing into the hands of the population which would have a rub-off effect in the entire tourism sector. We do have kind of a benign oligopolistic environment over there. In all these sectors, investors would have to be very careful about the valuations they pay, that is the kind of final message I would like to leave with our viewers.

Also, the last time you connected, you did believe that gold is one of those assets which could actually witness some bit of a correction. Give us some sense there that what is your current outlook on gold.
Manishi Raychaudhuri: So, that correction in a sense in a small way seems to be happening now. But ultimately the global central bank's preference for gold will likely continue. We have had a situation where there is a degree of, I would not say, aversion but a degree of caution about owning US dollar assets, even US treasuries, and we have seen that on the part of China and that is partly because of the kind of geopolitical tensions that we are seeing all across the world.

Despite the fact that there are bilateral discussions that are happening between the US and China and between US and other countries, this caution about US dollar is likely to stay for now and the only alternative that most of the central banks have is gold and possibly some other bullion, but predominantly gold.

So, over the longer term, I would still remain positive on gold. Investors would obviously have to bear with this short-term volatility that they are seeing in bullion prices.

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