ICICI Prudential AMC’s Chief Investment Officer Sankaran Naren believes value investing along with asset allocation and special situation themes are expected to do well amid the ongoing volatility in the equity market.

He seems to have implemented the same rules in his own investment decisions at the fund house in September, when domestic equities pause the long rally since March and BSE benchmark Sensex rose just 1.45 per cent.

Data available with Ace Mutual Fund showed that the fund house lapped up more than 1 crore shares in beaten-down FMCG major ITC and telecom firm Bharti Airtel during the month. It also bought over 20 lakh shares each in other underperformers such as NTPC, Tata Steel, ONGC, SBI, Zee Entertainment and GAIL (India).

Shares of all of these companies have declined between 8 per cent and 46 per cent on a year-to-date basis till October 13. Sensex is down 1.60 per cent for the same period (year to date).

“Equity markets are in the neutral zone now. This makes a case for staggered investments. The value theme is expected to recover and perform better over the long run while asset allocation schemes can be considered for managing near-term volatility. Considering the temporary crisis due to Covid-19, one should also invest in schemes that aim to benefit from special situations,” Naren said.

He also pointed out that the sectoral leadership of the market changes with every crisis. “Therefore, invest in potential future leaders through high conviction ideas,” he said.

His team at ICICI Prudential further lapped up over 10 lakh shares of GMR Infrastructure, HDFC, Tata Consumer Products, BPCL, L&T, Zydus Wellness, Bharat Forge, Coal India, Tech Mahindra and Power Grid.

Commenting on major sectors, Naren said the economic slowdown caused by the pandemic may hurt the banking sector, which represents almost 33 per cent of Nifty index, due to higher non-performing assets and lower net interest margins.

On the other hand, comfortable valuations, strong balance sheets, high cash levels to survive disruption, global presence, better diversification, continued deal wins and good earnings visibility are a few factors that may make the IT sector a value proposition, he said.

Naren said he is also comfortable with the pharma and automobile sectors.

From the IT, auto and pharma segments, the fund house added more than 2 lakh shares each in Maruti Suzuki, M&M, Infosys, M&M Financial Services, Ashok Leyland, TCS, Glenmark Pharma and Firstsource Solutions, among others.

“Pharmaceuticals may do well due to its critical nature post Covid-19. Earnings visibility is high and the sector is also good defensive play in times of volatility. Rural-focused auto companies with good earnings visibility also look attractive,” he said in a note.

Overall, ICICI Prudential increased exposure to at least 186 stocks, while sold shares in 180. Some of this buying or selling may have been done for ICICI Prudential’s passively-managed index funds.

Among other major purchases, the AMC bought 1-1.70 lakh additional shares in LIC Housing Finance, Birlasoft, Quess Corp, Relaxo Footwears, Heidelberg Cement, NIIT, Avenue Supermarts and Dabur India, among others.

On the other hand, the fund house lightened its exposures to Apollo Tyres, Vedanta, NHPC, Hindalco Industries, The Indian Hotels Company, Dishman Carbogen Amcis, Laurus Labs and Cipla, among others, and completely exited GE T&D, Healthcare Global, Intellect Design Arena, Mahindra CIE, Neuland Labs and Panacea Biotec.

The asset manager’s fresh buys during the month included Alok Industries, Shilpa Medicare, Suven Life and Vakrangee. It also lapped up shares of Angel Broking, Chemcon Speciality Chemicals, CAMS, Happiest Minds, Route Mobile and UTI AMC through the recent initial public offerings (IPOs).

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