The market has moved up sharply from the demonetisation lows. The midcap index, in particular, has risen 35 percent in the same period, and this warrants caution on part of the investors, said Harsha Upadhyaya, CIO, Equity, Kotak Mutual Fund in an interview with CNBC-TV18.
The recent correction in the midcap space was necessary, and on expected lines. However, we remain constructive on markets and corrections are likely to remain short-lived, he said.
One reason for the sheer optimism as highlighted by Upadhyaya was earnings recovery as well as the high amount of liquidity. Hence, he said, investors should use dips to build their portfolio and at the same time should be cautious in segments like midcaps where there are expensive valuations.
Kotak is positive on FMCG stocks which were least likely to get impacted by GST rollout, it was more from a structural point of view.
“We were looking at companies in FMCG space where we could see incremental market share gains, fewer disruptions in terms of taxation, and also a large pool of unorganised market in each of the business,” he said.
Most of the disruptions that could happen in the supply chain would have taken place during demonetisation and to that extent, we will see partial disruptions when GST will get implemented. But, hopefully, within few weeks this should get resolved.
Kotak is cautious on PSU banks as corporate credit growth is not improving and might take some time to get resolved. Also, corporate banks facing asset quality issues may have to grapple with higher provisioning and some haircuts as soon as they look at resolving those issues.
We continue to remain focused on retail NBFCs and some in the PSU space, said Upadhyaya.
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