Brace for volatility in 2018; prudent to follow bottom-up approach: Emkay’s Karwa

Karwa attributes current fall in the market to weak local environment which involves the PNB bank scam, along with global challenges such as hardening of interest rates. Additionally, investors are looking to take their profits off the table in areas where they have made money.

So, it would be prudent for investors to have a strong bottom-up approach, he said, adding that look out for stocks which are undervalued and have strong earnings growth.

Speaking on the earnings prospects, Karwa termed Q3 show as a good one and believes that trends for the fourth quarter also reveal that they are on the right track. Having said that, factors such as interest rates hardening could limit the upside on stocks despite good earnings, he said.

In the auto space, he said that two-wheelers and four-wheelers continued to perform well.

Meanwhile, among infra names, ports and roads, among others, offer good opportunities for investment.

For financials, he believes PSU banks can be an opportunity from 12-18 months perspective, but one has to be cautious on a sector such as NBFC on the valuation front. In the long term, there may be opportunities in this space.

Lastly, on the pharma sector, he highlighted how most issues with US FDA are softening. “Many companies are reworking their business model. Possibly in 12-18 months, you could see opportunity for patient contra investors,” Karwa told the channel.