In the Indian market context, some of the underperforming sectors like BFSI have seen a catch-up rally because of cheap valuations and opening up of the economy, Naveen Kulkarni, Chief Investment Officer, Axis Securities, said in an interview with Moneycontrol’s Kshitij Anand.
edited excerpts:
Q) We are back above 10,000 levels. What led to the rally on D-Street in the week gone by despite negative news related to COVID-19, Fitch downgrade, and the India-China border dispute?
A) The market rally is global and not limited to India. On the global front, the Nasdaq recently hit an all-time high and the liquidity in the equity markets globally continues to remain strong.
In the Indian market context, some of the underperforming sectors like BFSI have seen a catch-up rally because of cheap valuations and opening up of the economy.
Q) What are the important levels which investors should watch out for in the coming week?
A) The level of 10,500 on the Nifty will be a very critical level for the market on the upside, and on the downside 9,800 will act as a support. The market seems to have good downside support.
Q) Reliance Industries has become debt-free and proposes to list Jio and Retail business in the next five years. What is your view? Does it warrant a rerating of the stock?
A) RIL has already re-rated with the recent rally. All the deal valuations are captured into the stock price now. So, a further re-rating will be a challenge for RIL considering the sharp rally in the last two months with the announcements of Jio deals.
Q) Small & midcaps outperform benchmark indices in the week gone by. Is it the valuation that is fueling optimism in the space?
A) Opening up of the economy, cheap valuations, and the significant run-up in largecaps have opened up space in the small and midcaps.
While the optimism is not necessarily backed by operating performance but quality businesses are likely to see some allocations.
Q) What is your call on the telecom space after the SC AGR hearing? Banking and financial stocks saw a big boost on Thursday. What are your views?
A) The Telecom sector is doing quite well and will continue to see improvement in Average Revenue Per User over the subsequent quarters. Thus, Telecom is one of our key allocation sectors.
The banking sector has its own set of challenges on account of moratorium and challenges of NPAs. The impact of NPAs will not be known for quite some time as a significant portion of bank loans are under moratorium. In this scenario, the large banks with solid liquidity have an edge and we prefer them over the smaller banks.
Q) What is driving the rally in Dixon Technologies?
A) We find Dixon Technologies interesting as it has exposure to the critical consumer discretionary segment like mobile phones, consumer electronics, and others. This segment will have a pent up demand and the opportunities continue to remain significant.
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