Anand Shah, Deputy CEO & CIO, BNP Paribas MF is of the belief that PE re-rating is likely to continue given interest rates remain low and with expectation of them remaining benign globally and locally as well.
Moreover, stock picking opportunity in the market remains as the economy recovers, says Shah. There are opportunities even outside of largecaps – especially in midcaps and small caps where earnings growth has been visible, he adds.
According to him, the macro parameters are getting better but the question is when would the micro – the GDP growth and the earnings growth start reflecting the superior macroeconomic parameters.
On the earnings front, he expects the growth to pick up FY18-19 onwards. Although markets have done well despite earnings not being up to the mark.
He is also of the view that going forward household savings, which is still more in to real estate and gold, will move into equities and equity mutual funds. This shift will help in wealth management business maturing going forward.
The house is upbeat on non-banking financial companies (NBFCs) that are B2C focused. They also like the housing finance companies, he says.
Speaking about aviation space, he says it is seeing good tailwinds from rupee appreciation and fall in crude prices. However, another factor benefiting the sector is growth in passengers. Aviation is one of the discretionary spends that have entered into the Indian middle class.
Moreover, the fares have been competitive versus railways as well. So demand side growth for the sector is unprecedented. Also with governments focus on developing tier 2-3 airports, will help the space, believes ShahHowever, supply could be a challenge, which tends to grow faster than demand sometimes and kills the pricing power for the companies. So, one cannot buy and hold and sit tight with their positions in this sector but will have to actively keep analysing the demand-supply gap. As of today, demand id better than supply, he adds.