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Sep 19, 2017 04:21 PM IST | Source: CNBC-TV18

Sundaram's Krishna Kumar says time right for value buying; sees recovery in consumption theme

S Krishna Kumar of Sundaram Mutual Fund said inflows into financial instruments have been steady and there has been no major trend change.

Increasing allocation into stocks that offer value at these levels could be a good strategy for investors, according to S Krishna Kumar, CIO, Equity, Sundaram Mutual Fund. However, he points out there could be some sectoral churns in about six months.

The recently-concluded earnings season saw some disruption in results of major companies on the back of roll out of GST, among other things. The consumption theme, in particular, suffered due to the new tax legislation.

Kumar said there were expectations of consumer staples and discretionary bearing an impact. However, as the economy grows, the sector could see a recovery.

Midcaps and smallcaps were battered last week as traders unwinded long positions. SEBI ban on shell companies and geopolitical tensions also added to the carnage.

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“There was a sense of weak results towards the end (of earnings season). Along with that, global tensions due to North Korea proved to be a trigger for lightening of positions across the board. Additionally, the SEBI ban on ‘shell’ companies jilted money that was stuck in different parts of market,” Kumar told CNBC-TV18. The uncertainty led to hammering of these stocks, he added.

This could have been a good entry point for investors, he said. Inflows into financial instruments have been steady and there has been no major trend change. Rather, there were inflows of lump sums during the corrective phase, he said.

On the rate cut debate and the effective stock selection, Kumar said rates will be benign for the year. The previous rate cut does not really matter, he said, adding liquidity in the market could keep the borrowing cost and force banks to drop rates.

In pharmaceuticals sector, valuations had to correct more to reflect the pain in the sector. This could take place for a few more months, which will then make it more attractive on a broader basis.
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