Market uptrend intact, go for high beta stocks: Daiwa MF

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In an interview with CNBC-TV18, David Pezarkar, head of equity at Daiwa Mutual Fund, spoke about his reading of the market and the road ahead.

Below is an edited transcript of his interview on CNBC-TV18. Also watch the attached video.

Q: Do you expect more on the upside or do you think it's a good idea to take any kind of profits that you have made and run?

A: We are seeing extremely strong inflows from FIIs. While it's extremely difficult to forecast whether those flows are going to continue with the same intensity as they have in the past month or so, but as long as we are seeing these kinds of flows, it looks extremely difficult that the market would completely turn from here.

Of course, since it has run up so much, there is always a possibility of a minor correction, but I would think that maybe a 3-4% kind of correction is still par for the course. I would think that one should look at adding high beta stocks, if one gets that kind of a correction.

Q: If one has to play for the upside, how should one add risk to one's portfolio now? Would it be a high beta names something in the financial space or infrastructure and stay away from your FMCGs?

A: I think within each sector one will also need to look at selective names. So even maybe in the FMCG pack, one can find few stocks, which have not run up in the last two-three years relative to the others, but per se, one should look at the interest rate sensitive, capital goods.

I would also imagine the commodity pack but base metals have been weak in the past two-three days although the liquidity continues to be quite lose, so one needs to keep a watch there. But I would also feel that the commodities pack should also be attractive because if one looks at those kinds of stocks in terms of pure valuations then one still can justify some kind of appreciation there.

Q: The momentum has been on the side of metals in terms of specific sector. Would you chase the metal space expecting some more on the upside from here?

A: I think metals is more of a global play and the factors going for metals are the fact that the European central bank has decided to give long-term liquidity to the banks there and the US Federal reserves has also said that it would extend its low interest rate policy.

But on the other hand we are seeing that base metal prices have although they initially reacted positively to these announcements there has not been too much of a proper follow-through there. So while I would think that the metal sector should be a big beneficiary of this easy liquidity I would feel that one needs to be a little bit cautious and look at the high quality names there because there is still some value left there.

Yes, I would feel that one should have an overweight position in the sector but only in the high quality names.