After a recent sharp rally, "we do expect a period (a quarter or so) of consolidation in the market," Prateek Agrawal, Executive Director at Motilal Oswal AMC said in an interview with Moneycontrol.
Given the growth story of the country, a correction of 5 percent from current levels would make markets attractive to investors, he feels.
With nearly three decades of experience in the asset management business, investment banking, advisory services and sell-side research, Prateek says faster-growing NBFC and retail banks, engineering and new-age technology companies should be in the portfolio. He also continues to be positive on defence and EMS spaces.
Do you expect a 5-10 percent possible correction in the market, after the significant rally in the current financial year?
Markets are at a high but on account of the compounding of profits between the last high and the present high, the valuations are not at a high. If we take the construct of 18.5XFY25 EPS (of 1100e), we get an index target of over 20,000 by March-end.
However, the upside is lower than what is expected out of equities and hence we do expect a period (a quarter or so) of consolidation in the market.
Given the growth story of the country, a correction of 5 percent from current levels would make markets attractive to investors.
Do you see the momentum continuing in broader markets, despite a sharp rally?
Valuations are catching up and while stock-specific moves can continue given the strong inflow of money from domestic investors into the smallcap space, one should expect a period of consolidation.
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Spaces, where the business growth momentum sustains, would hold up better and should remain the focus of investors.
Will the IT sector end the current financial year with single-digit growth, but will show robust performance in the next financial year?
IT sector sees a deal momentum when there is a new disruptive technology that the industry wants to incorporate. At the current juncture, AI (artificial intelligence) is something that is catching the attention. This implies a strong growth momentum.
However, given the concerns of economic slowdown, the same may take some time to manifest. So yes, I share the same thoughts.
Will defence and EMS space report healthy earnings growth in coming years? Should these sectors be in the portfolio?
We continue to be positive about these two spaces and both find presence in our portfolios. We believe that the indigenisation of defence and higher build-up capabilities is an enduring theme. Similarly, the EMS space is seeing a strong tailwind of China +1 and benefits, in pockets, from the PLI initiative of GOI.
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One sector that needs to be part of the portfolio for the long term
Faster-growing NBFC and retail banks, engineering, and new-age technology companies should be spaces that find space in the portfolio.
Do you really expect two more rate hikes by the Fed by the end of 2023?
We have to keep track of inflation data. Given that India (services provider) and China (goods provider) both have seen inflation fall, it should be a matter of time before the US also sees inflation decline to within the targeted range. If inflation falls within the range and the labour market relaxes, the expected rate increase may not happen.
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