Infra, bank continue to underperform: N Shah

Excerpts from Bazaar on CNBC-TV18 Watch the full show » Nifty BSE | NSE 10/02/12 Are Mutual Funds betting on Nifty?

Nilesh Shah , MD & CEO of Envision Capital feels that till inflation and the monetary policy tightening does not stop, infrastructure and banks will continue to underperform.

Shah told CNBC-TV18, "Infrastructure and banks are very rate sensitive sectors. Interest rates again would be a function of inflation and money supply. I don't think there are any signs, which are evident of inflation coming down or cooling off. As long as that does not happen, the case for a tighter monetary policy would continue to be there. In that kind of an environment it is going to be very challenging for both the banking as well as the infrastructure sectors to outperform. Valuations have become very attractive in both the sectors. We clearly see a lot of long-term value emerging in both the banking and infrastructure space. Having said that both these sectors still continue to be reasonably very well owned by most institutional investors and that will continue to be an overhang on the stock price performance." 

He further added, "From a long-term perspective, we clearly see a lot of value in both the sectors but we still believe that from a short-term to medium-term perspective there would be significant pressures on both the sectors. I think especially when markets do correct or continue to correct, we believe that both these sectors will probably correct in line with the market or even probably more than the broader markets. So I would say that till inflation and the monetary policy tightening do not stop I think till that point of time both these two sectors will continue to underperform."

Disclosure: It is safe to assume that analyst and his clients may have an investment interest in the above stock/sector.