Interview – Mr. I.V. Subramaniam CEO & CIO Quantum Advisors   Nov 16, 2009


This interview had first appeared on ET Now and Economic Times on November 11, 2009.

Mr. I V Subramaniam, CEO & CIO, Quantum Advisors Private Limited, shares his views on the economy, equity markets and various market sectors.


As regards the technical strength for a market, 4,860 is a level that people will be watching out for once again. If indeed it corrects downwards and goes below 4,790, some analysts seem to think that this market could be in for a little bit of weakness. Which way would you put technicals on Wednesday morning?

 Mr.Subramaniam: "We are fundamental investors. So looking at charts for near-term volatility does not make sense to us. Market sentiments in India are quite strong and we think that over the next year or two, the earnings growth also will be quite good.

Our estimate is that by the middle of next year, the index should touch closer to the 20,000 to 21,000 mark. While we are taking away profits from certain sectors, which has gone up significantly or valuations look expensive, we still remain invested in the market and we do not see any reason not to remain invested in this kind of growth environment".


The telecom stocks saw a bit of sell off yesterday. Do they look interesting at these lower levels or is more downside expected?

 Mr.Subramaniam: "I think in terms of downside, may be it could decline for some more time largely because different investors have different views on where the earnings as well as growth would be after the tariff wars, which is taking place right now".

"But from our side, we are increasingly of the view that may be it is beginning to look attractive, may be if we have a slightly longer term horizon and assume that market shares get stabilised and tariff war is resolved, most of these companies still have enough growth opportunities going forward. So taking that into account, it is beginning to look attractive".

"It is already there in the portfolio but we may want to add more. However, we have not yet concluded on that. We are still having an internal debate as to what level is attractive enough to add".


We are seeing a little bit of strength coming into the metal stocks on Wednesday morning. But looking at the way the dollar is going to be here, do you see that as playing out on commodity stocks? Further, would that be an area that interests you to maintain positions there right now?

Mr.Subramaniam: "It definitely interests us to maintain positions in that segment and between both the ferrous and the nonferrous. While the nonferrous is beginning to look attractive, particularly if you consider the recent results by some of the companies, we are still more comfortable on the ferrous side".

"We still like the steel cycle and the way steel companies are operating and the way the valuations are. So we continue to hold steel but as I said in the past week or so, we are slowly beginning to like the nonferrous also. So may be at some appropriate valuation levels, we may want to add it into the portfolio".


Keeping in mind the dollar-rupee appreciation, depreciation story, do you think it is time to book profits out of IT?

Mr.Subramaniam: "No. I do not think it is time to book profits out of IT. In fact, my recent meetings with most of the IT companies seem to suggest that the business is just picking up. In the last month and a half, most of the companies indicated that the client inquiries have significantly increased".

"Most of the clients have also begun to release orders and in fact some of the companies are now busy scouting for talent and adding number of employees. So clearly, there is lot of traction in that segment and I think both the business growth as well as earnings could be quite strong going forward. Considering this, I do not think that I would want to sell out purely because the rupee is appreciating".

"Again, we did say year-and-a-half back, when the rupee was appreciating, that the way to look at it is the way Japanese companies performed. Despite an appreciating currency, they did extremely well in terms of automobile exports. The reason they did well was higher quality and better products manufactured by them".
"Similar is the story we think will happen in Indian companies. Many large "
Indian companies will have enough to offer. So even if the currency goes against them, I think they will still do extremely well in the future. So we are not booking profits in that segment at all and we may change based on valuations, we may get out of one and get into the other but we will still like that story a lot"'


Does anything in the various healthcare segments appeals to you from a 3-6 month perspective or probably slightly longer as well?

Mr.Subramaniam: "No. On a longer term, neither any MNC nor any domestic company appeals to me. The story remains the same as it has been for quite sometime that some of the Indian companies have very attractive export markets to address and as long as they focus on R&D and continue to invest in them, I think these companies would do very well going forward.

The real challenge in a regulated market is on ways to face the regulators and the kind of challenges that one will confront going forward. That is something which is very unpredictable in this business and also remains risky.

Having said that, I think there are companies which have been doing this for longer time and they have been investing both in R&D and geographically they are very well spread out in terms of addressing the opportunities. So, therefore, I still like that space - both MNCs as well as the Indian companies".



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