Daily Voice: All data points continue to point towards a strong bull run in equity markets, says this analyst

PSU mutual funds provide an expansive basket to invest in government companies which is well diversified. However, the low-cost of PSU companies from a few years ago has disappeared. PSU companies also trade at expensive valuations and some categories like defence stocks are much more costly compared to many private sectors. Nonetheless, banks and energy stocks within the PSU sector continue to trade at reasonable valuations. Despite this, PSU mutual funds still offer value but may underperform due to changing market trends. Therefore, shifting some allocation away from PSU mutual funds to more diversified strategies may be a better option at this point.

Are Zomato and Paytm looking overvalued?

Zomato and Paytm are both expensive stocks for different reasons. While Zomato’s business model is very strong and cash flow generation has improved significantly, the valuation multiples remain staggering. The company also enjoys a scarcity premium which could be reduced in the future if Swiggy were to get listed.

Paytm on the other hand has significant business challenges which also include regulatory issues. Paytm will take significant time to recoup from the recent setbacks on account of the regulatory issues. Thus, both stocks can be considered expensive at the current juncture, however, considering business stability and better long-term prospects, Zomato is better placed than Paytm. (It is not a recommendation)

Is the paint sector due for a strong revival?

The paints sector has delivered consistent volume growth over the years. This trajectory will continue to remain strong as there are multiple long-term triggers of premiumization in the segment. However, the sector is likely to see a rise in competitive intensity which will impact margins in the medium term. Lower crude oil prices will support but may not be great help for margins as competitive intensity in the sector rises further with lower input costs. Thus, the sector could experience growth due to increasing volumes, but margin issues are likely to persist in the medium term.

Are you bullish on the entire BFSI space or are you selective in the entire segment?

The BFSI sector has been a mixed bag with some segments doing better than others. The banking sector continues to see challenges on account of deposit mobilisation and this issue is likely to persist for a longer time frame. However, rate cuts are around the corner and that is positive for the NBFC sector. The wealth and capital market-related segment continues to do well but valuations have also soared recently. The insurance sector could be another steady compounder from current levels. Thus, the BFSI sector makes a good case to be invested with multiple options but banking sector revival could take some more time.

Do you believe the equity market is in a secular bull run?

Clearly, the market is in a secular bull run phase. We could have one or two years of some sideway movements but the structural trends continue to remain extremely robust. Thus, at this juncture, all the data points continue to point towards a strong bull run.

Will the Fed announce the first interest cut in September and take a pause?

The inflation print has not been very encouraging and the Fed is more likely to cut 25bps in this month. However, the Fed taking a pause seems a little unlikely as the headline rate continues to remain quite high. Thus, near term there will be more cuts of 25bps before the Fed takes a pause which will be by early or mid-next year.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.