Ride with pvt banks, hunt with PSUs: Experts

"Yes, the choppiness will continue but the broad view is that the Nifty is likely to consolidate and even correct on the downside. My suggestion is to maintain long positions on the bank Nifty and look to buy bank-stocks whenever they come down on corrections, remains valid."

Tushar Pradhan, CIO, HSBC AMC supports this view and suggests investors to remain with private sector banks and seek selective exposure in PSU banks.

Below is a transcript of Tushar Pradhan's analysis on CNBC-TV18.

Q: Do you expect to see new highs in the market by the end of the year or do you think that a lot more needs to be done by the government?

A: Predicting the market is fraught with risk, so I will avoid that. But what was expected for a long time has all come within a short span of a week. A key concern, from my point of view, is if any of these long-term measures will be able to sustain the sentiment in the near-term. I think the market will have to wait for more cues before it sees any reason to cheer.

Q: While the market is perhaps consolidating and waiting for more cues, what's the portfolio shift that you recommend?

A: I think there is going to be a two-tier market. There has been a lot of risk aversion in the last two-to-three months and the defensive stocks and free cash-flow generating companies command a premium unseen in their own valuations. So obviously, there is a lot of overvaluation on that side.

On the other hand, cyclical, industrial and material companies are trading at much below their average multiples over the last five or six years. So, a call has to be taken whether an investor wants to take a risk because obviously valuations are in favour of that or whether the investor wants to keep his aces close to his chest and continue in the defensive stocks.

Going forward, it needs to seen if the government’s initiatives really play out and growth is restored. If the return to growth is something that someone wants to bet on, clearly, cylical and cheaper industrial stocks is the way to go. However, the market does not believe that such an environment is upon us. So, at the moment the investor is left with the choice of believing in growth or prepare for reduced growth expectations for the next year.