Jul 28, 2017 01:42 PM IST | Source: CNBC-TV18

Sundaram MF sees mkt consolidation ahead of next growth phase; monsoon, GST, results key drivers

S Krishna Kumar of Sundaram Mutual Fund said that the earnings have been pretty good and that retail private banks have seen strong delivery.

Market could go through consolidation before heading into the next growth phase, believes S Krishna Kumar, CIO-Equity at Sundaram Mutual Fund.

“In a long term growth phase of the economy, the market does go through a consolidation phase…markets would be more reactive to results that come out this season, along with monsoon progress and the impact of GST,” he told CNBC-TV18 in an interview. These factors will now be the drivers for the market going forward, he added.

With earnings being one of the key drivers, Kumar observed the retail private banks continued to see strong delivery. Housing finance and automobile companies have performed well too, he said, adding, the latter delivered well on growth and as expected the margin impact was also seen due to the GST.

Having said that, Kumar cautions that one should not be too reactive to the results as the country is going through a transitory phase.

Speaking on the outlook on corporate-facing banks, he said that it is a negative surprise in some cases where some of the results have shown fresh slippages outside the watchlist.

However, most of these banks have also seen reduction or flattening out of overall slippages, Kumar told the channel. So, how will the current fiscal pan out for them?

“The credit cost will be elevated in FY18, but will come down next fiscal,” he said.

On midcaps, Kumar said the right approach would be to look for strong businesses, good promoters and better balance sheets. “Look at good long term stories. We are looking at next set of stocks which will help in performance in next three years,” he said.

Kumar also said the valuation mismatch is seen due to domestic factors. For instance, companies like Bajaj Finserv were having higher valuations due to high-valued IPOs. Further, he said the overvalued sectors like insurance will see paring down of holdings. He also expects consumer durables earnings & return on equity to compound over next 2-3 years.
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