Real estate and cement sectors could be wealth creation opportunities over 3-5 years
The 30-share BSE Sensex has fallen more than 1,600 points from August 28 high, dented by falling rupee, rising crude oil prices, fiscal deficit concerns and escalated trade tensions.
"There has been a tug of war between macro concerns and micro improvements. So, the market is likely to be volatile over next 6-8 months given that we are going into state elections, general elections," Pankaj Tibrewal, Vice President and Equity Fund Manager, Kotak Mahindra Mutual Fund told CNBC-TV18.
Kotak MF is cautious on market as valuations are not cheap right now.
Capital market regulator Securities and Exchange Board of India (SEBI) on Tuesday announced a cut in fees or expense ratio for mutual funds, which will have direct impact on their earnings or these companies can pass on to distributors to reduce impact on earnings.
"Kotak MF is a regulated entity and respects any verdict of the regulator. It is difficult to say about the SEBI order's impact on MF as it depends on AMC to AMC and how much they pass on to distributors," said Tibrewal.
He believes the industry has a huge growth potential as MFs account for only 13 percent of India's GDP as compared to 65 percent of GDP ratio, globally.
He said overall consumption basket and staples have done extremely well and so have discretionaries. He feels consumer discretionary is likely to see traction.
With higher fuel price, rising inflation pressure, we may see cut in discretionary spending in short term but the long term looks good, he feels.
He said consumption space is at high valuations and not cheap now but be selective in stock picking.
Kotak MF is cautious on NBFCs space. He said companies which are more exposed to loan against property (LAP) segment needs to be watched out for. "Most of them are wholesale funded companies, so are more prone to interest rate."
He is very selective in the space, more focussed on retail-oriented company where liability is good and asset quality is not a concern.
Tibrewal expects massive consolidation in the sector for next 3-5 years. "We see 20-25 pan India players after few years and would be difficult for 1-2 companies to survive, either they will merge or look for joint ventures."
Pradhan Mantri Yojana had massive hit, though 44 lakh houses constructed recently which is huge, he said, adding cement demand continued despite pressure in real estate space surprised positively.
So he advised be selective in the space but real estate and cement could be wealth creation opportunities over 3-5 years.
Kotak MF is very stock specific in pharma space as generic price erosion is not over yet.
Rupee depreciation is a great tailwind as major companies have more than 50 percent exposure to dollar denominated business, he feels.
Till last year, he said Kotak MF was extremely cautious on the space due to expensive valuations but first 8 months of this year, smallcap and midcap underperformed largecaps.
More than 40 percent companies of BSE 500 corrected more than 20 percent but still it is difficult to get at bottom of the pyramid in some stocks, he said.He believes midcap and smallcap valuations are reasonable than it were 6-8 months ago. "One can use this correction for good value picking and build portfolio which will be benefited after next 2-3 years."