With the Indian equity market continuing to scale new highs, the big question is how to read the fundamentals of the market and what is the way forward.
UR Bhat, Director, Dalton Capital Advisors said although the domestic institutional investors seemed to have become marginal sellers, the foreign institutional investors have become more pronounced buyers.
Bhat said market seems to be trading close to its peak because the way international markets are behaving - at least the US market futures suggest that there is some turbulence going ahead, Europe too is trading weak. So, we may have come to a stage where something big is likely to happen on the global front.
Moreover, at the current levels, there is no comfort that even if there is turbulence in international markets, India will hold on, said Bhat.
According to him, the market is certainly stretched in terms of valuations and there is earnings support to the market at these levels. However, one cannot argue about liquidity, which has been in abundance and has been driving the market. So if liquidity keeps coming in, then the market can go to any valuations.
Sector specific, auto has weathered all the storms. Banking, Financial Services & Insurance (BFSI) companies look good.
Engineering companies along with industrials could be the beneficiaries of potential revival in the economy.
Pharma could be a contrary bet because the worst has been factored in, said Bhat, adding that medium-term investors should look at this space.
However, IT sector could be in for a secular correction and furthermore, a strong rupee is not going to help them.
Metals have done well on the back of global economic revival but most of it is already in the price, said Bhat.For more, watch video