The market will be range-bound in the near term with earnings momentum unlikely to resume soon, Harsha Upadhyaya, CIO Equity at Kotak Mutual Fund, says, sticking to his cautiously optimistic stand on the market.
"Until and unless we see another earnings upgrade cycle we don't see too many positive triggers for the market at this point of time," he said in an interview with CNBC TV-18. However, he adds that due to the time correction for the last one and a half years, the valuation risk is probably a lot lesser in the current market conditions.
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Upadhyaya continues to remain underweight on the IT sector, citing weak numbers reported by leading IT players recently as well the overall subdued macro conditions, especially considering the current volatility in BFSI segment. “Valuations are not so attractive that you can really take a large outsized bet on the sector,” he said.
On internet and new-age technology companies such as Nykaa and Zomato, Upadhyaya considers this space to be still expensive as compared to the overall market.
“There are still concerns in terms of a capital allocation policies of some of these companies or the possible stake sale that would come from earlier investors etc. So, to that extent, given the current market conditions and where these companies are trading at, we would remain cautious on this entire space. Yes, there are some stock-specific positions that we have in our portfolio which we will monitor, but overall as a space, I don't think we will take a very big positive view at this point of time,” he adds.
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He says the fund will only invest in sectors where earnings growth is steady, such as banking, auto, cement, and industrials and also mentions that Kotak Mutual Fund has a large allocation to both public and private sector banks as larger names in financials may have a better ability to manage low-cost deposits.
There are no top-down drivers for the pharma space as of now, according to him. Although there may still be some volatility, especially via macro developments, he expects to see better earnings growth in June/September. He also said that consolidation in sectors like aviation may help larger names do well.
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