Andrew Holland is negative on stocks in IT sector which have reported very poor number. It has already faced pain for the past 1.5 years.
The S&P BSE Sensex which rose to fresh peaks has already rallied by about 22 percent so far in the year 2017 to surpass 32000 mark for the first time, but investors should not get worried about sudden rise as there are no specific triggers for a big correction, Andrew Holland, CEO at Avendus Capital said in an interview with CNBC-TV18.
“There seems to be no big trigger that is happening amid all the negative news which could push markets lower. The US GDP data was below expectations which raise expectations that US Fed might not hike rates in a hurry, therefore, liquidity will continue,” he said.
Excess liquidity is pushing bonds and equities higher and hence investors should remain long in the market rather than looking to go against the momentum. Even if there is a correction, it would be largely on technical factors.
“Both global and Indian market is riding on the liquidity bubble which is not going away. The fact that there is no fear worries me. And, I don’t keep saying that this time it is different and it is time to live with higher PEs – it just doesn’t happen like that,” said Holland.
He further added that when momentum is driving the market valuations do look stretched.
Commenting on the stocks, Holland said, he still likes private banks from the short to medium term basis. We continue to feel that they would take the share of the PSU banks which reported appallingly bad numbers.
However, he is negative on stocks in IT sector which have reported very poor number. It has already faced pain for the past 1.5 years.
The other sector on which Holland is negative on is the pharma sector which has come under pressure after a brief rally. And, even the results from some of the pharma names have not been very good.
Rate Cut on Anvil:
Holland expects a 25 bps rate cut by the Reserve Bank of India on August 2. This is given, but there is room for the central bank to cut more and surprise the Street with a 50 bps cut.
With liquidity continuing across the globe and weak dollar all favours a rate cut.A 25 bps rate cut is already priced in the market, but a 50 bps cut could lead to a sharp rally, suggests Holland.