Jul 25, 2017 01:02 PM IST | Source: CNBC-TV18

Nifty @10K is a landmark achieved; IT, pharma and PSU banks reasonably valued: Kotak MF

Nilesh Shah said that the approach in the market should be that of bottom up one.

The Nifty had a historic opening on Tuesday as the index entered the five-figure mark of 10,000 for the first time ever.

For fund houses and managers, while this is a landmark achieved, this is not a moment for worry or exuberance, said Kotak Mutual Fund, adding that the focus is always on picking up the right stocks and at the right values.

So, what are the sectors which could offer the balance between growth and reasonable valuations?

“There are three sectors where valuations are reasonable in terms of historical leverage,” Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company (AMC) told CNBC-TV18 in an interview. IT, pharma and PSU banks or corporate-facing private banks were few of the sectors. You have opportunity to enter stocks that are trading below averages, but one needs to pick them up on a bottom-up basis.

According to investor education portal, in bottom-up investing, the investor focuses his attention on a specific company, rather than on the industry in which that company operates or on the economy as a whole. This approach assumes individual companies can do well even in an industry that is not performing.

Meanwhile, there are a few others where the valuations are a little higher, but growth potential could be good. Shah named auto, auto components, select pharma and private banks, among others, in the list. But here too one needs to be very selective, he added.

On fears of liquidity being dried up post global central bank decisions of quantitative easing, Shah said that the market in 2017 has been far more matured about such developments. “There could be a transient impact of FII withdrawals, but not a permanent one,” he told the channel.

Speaking on any specific underperforming stocks, he said that one again has to be very selective in picking among these as well. “We don’t want to enter into leverage companies where prices are jumping up 8-10 percent a day. The focus will be on large and midcaps and among them too, it will be a bottom up approach,” he added.

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