He said the focus of the house continues to be on corporate banks.
Enhanced liquidity has supported the market in March and April but uncertainty around Lok Sabha election results turned the market volatile, said Harsha Upadhyaya, CIO-Equity, Kotak Mutual Fund, adding that post-election verdict investors will shift their focus to earnings and market fundamentals.
"This is market where you cannot bet on any event but you will have to watch how fundamentals are unfolding, some of which are not comfortable at this point of time and hence there is choppiness in the market," Upadhyaya said in an interview with CNBC-TV18.
With regards to fund flows, he said, the structural shift from physical to financial assets continues and there is continued momentum in terms of SIP flows and EPFO flows into ETFs, said Upadhyaya.
He added that a critical thing to watch out for going forward would be the lump sum MF redemptions and whether they are likely to continue post-election verdict or whether they turn into inflows. "Without that we would be close to Rs 4,000-6,000 crore of inflows, which is not bad but moderate compared to the peak inflows that the industry saw."
However, as far as foreign inflows are concerned, once the election uncertainty is out of the way, flows would resume in line with other emerging markets, noted Upadhyaya. The quantum of inflows would be debatable but both domestic and foreign investors would look to invest in the country, he said.
Sector-specific, he said the portfolio focus of the house continues to be on corporate banks. "Our view is while asset quality issues are stabilizing, while provisioning would start to moderate from here on. It is better to look at corporate lenders, who have significant business in retail segment and where there is adequacy of capital," he said.
"The banks which have capital adequacy will be the ones who will be able to gain incrementally given that a lot of space has been vacate by NBFCs and since not all public sectors banks are in good health," he said.
On the IT sector, he said although the house has positions in the sector they do not expect 2018 like returns to be repeated in 2019. Therefore, they have a very stock specific approach towards IT and prefer to look at those companies where business momentum continues and where ongoing buybacks could have downside support.
On debt markets, he said while things seem to be stabilising on one side, there are new issues which have cropped up and so the space remains a concern for the health of overall economy and sustenance of higher valuations on the equity side. The space is not completely out of the woods yet, he added.
The house is underweight on the FMCG space, he said, adding that the margin of safety for consumption space is limited given high valuations.Source: CNBC-TV18The Great Diwali Discount!
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