V Srivatsa, EVP & Fund Manager, UTI Mutual Fund is of the belief that market would continue to witness minor correction because nobody can assess the full impact of demonetisation as of now. Investors are in a wait-and-watch mode.
Globally too, interest rates are going up and so money is flowing out from risky assets to safer assets. So, the market will remain subdued with a negative bias for the next couple of quarters, says Srivatsa.
With crude oil prices too on an uptick, the house would prefer to play the theme through utilities, which are indirect beneficiaries than pure upstream companies. According to Srivatsa, the case for investing in utilities is that valuations are at a record low and is a space that is less impacted by demonetisation.
The fund is still upbeat on IT and pharma sector even though IT space is still not out of woods but it is likely to be the sector that would report profitability going forward. The house is already overweight on pharma but would still invest in it, says Srivtsa.
The fund is also overweight on auto sector although there would be a near-term impact on it due to demonetisation. But Srivatsa believes that the demand has just been postponed and not been destructed. After seeing poor sales growth for the next 1-2 quarters, pent-up demand would compensate for the loss, believes Srivatsa.
Moreover, the auto ancillaries will face the brunt of demonetisation impact same as the auto space, says Srivatsa.
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