Saurabh Mukherjea, CEO-Institutional Equities at Ambit Capital continues to believe that the Sensex is headed towards the 22000-mark due to the dual impact of a slowing economy and mounting stressed asset in the banking system.
“The potent combination of a slowing economy with gradual deterioration in banking system makes it inevitable that we will run into serious challenges over the course of CY16,” Mukherjea says.
On the current hammering of mid and small cap stocks, Mukherjea pointed out that while stocks that have run up heavily are bound to correct, there is no reason for targeting mid and small caps, particularly since few large-cap companies have severe structural issues.
“Several Sensex constituents like metals, banking, heavy industrials etc. have fairly profound structural problems and hence their de-rating is going to be a steady process,” Mukherjea says.
He advises being careful on the banking sector, as it faces double whammy of stressed assets as well as pressure from Reserve Bank of India (RBI) to increase provisioning on stressed assets.
The heavy weightage of the banking sector on the frontline indices is the key reason for the pressure on Sensex multiple, Mukherjea says.
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