What Yogesh Patil says on defence, chemicals, BFSI, other sectors

Yogesh Patil, chief investment officer for equities at LIC Mutual Fund, said he sees the possibility of some reversal in foreign portfolio investor outflows after a $20 billion selloff over the past 15 months, noting that the period was marked by earnings weakness and tight liquidity conditions.

“All these things have reversed, except FPI inflows,” Patil said in an interview with Business Today.

Patil said he sees an improvement in credit growth, driven by interest rate cuts, structural reforms undertaken by the government and tax cuts. He said the next 15 months could be better for the market compared with the past 15 months.

Patil said the December quarter is expected to be better than the September quarter, which was impacted by certain GST-related announcements and an extended monsoon.

“We do not see a major recovery, but obviously commentary is positive, neutral to positive, and cost takeout deals are taking the lead,” he said.

Patil said conditions were normalising. He noted that the auto sector has seen very good growth, while FMCG was still picking up.

“We are still expecting mass consumption to pick up. Selected capex-driven companies or sectors are showing good progress,” he said.

Patil said LIC Mutual Fund had a multi-asset fund that invested in gold and silver.

“I am not very sure whether investors will get similar kinds of returns as seen last year, but definitely there is a global shift. Basically, there is a difference between currency and money,” he said.

To protect the value of currency, Patil said investors were moving towards precious metals. He said most central banks were buying gold and building reserves, noting that after developments following the Russia–Ukraine war in 2022, it had become difficult to rely on a single country or a single currency.

He said this has emerged as a new theme globally, as countries sought to protect the value of their reserves while continuing to trade, given the risks of dependence on one currency.

Patil said he remained positive on commodities and expected a structural change over time.

“Whenever a currency reset happens, then only we can see some softening. Till then, it seems most investors are shifting their value towards commodities,” he said.

He added that supply of gold and silver had not increased, which was also supporting prices.

On sectors, Patil said LIC Mutual Fund was positive on both defence and chemical sectors,  He said he is gradually increasing exposure, as certain chemical segments were showing good traction. He said China had reduced incentives for export-driven companies, which was helping stabilise prices across sectors, including chemicals.

He added that the Chinese government had also started focusing on profitability, which he said provided some positive signals for Indian companies, while noting that chemicals remained a broad sector.

Patil said the fund was positive on specialty chemicals, where opportunities existed to build contract development and manufacturing organisation businesses due to lower competition.

On defence, Patil said countries globally, including India, were increasing defence spending. He said India’s purchase orders and agreements over the past three years were almost three times those seen in the previous five years.

“Defence spending is increasing and indigenisation is improving. These two factors are gaining traction, and we are positive on the defence sector,” he said.

Patil said BFSI sector expected to continue performing well as credit growth was picking up, while benefits from consumption were yet to fully play out. He also said he saw significant capital expenditure in the power sector, green energy and energy security.