Kenneth Andrade says economy in goldilocks, stay with growth bets

Corporate profitability growth this year will lead to a goldilocks period for the economy, Old Bridge Mutual Fund's Kenneth Andrade said.

Old Bridge Mutual Fund's Kenneth Andrade is advising investors in a latest note to be patient and wait for opportunities to buy at more comfortable valuation, which may possibly emerge within the next year or two.

The Old Bridge note adds that finding value in present market is 'challenging' due to high valuations and investors should 'align with growth businesses' instead of scouting for undervalued bets which may be scarce to find.

"The focus remains on monitoring troubled sectors for potential investment when valuations become attractive", the note issued by Old Bridge Mutual Fund added, suggesting infrastructure, IT, chemicals and real estate may emerge as areas of interest.

The business environment remains robust along with capacity utilization for India Inc nearing 90 percent, Andrade's note said, adding that 'corporate profitability growth will be healthy this financial year', resulting in a goldilocks period for the economy.

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Here's a quick summary of the spaces that Kenneth finds interesting:

IT: There seems to be a renewed interest partially due to valuation comfort with respect to other sectors. The order pipeline of tech majors should drive growth, Kenneth's note added.

Chemicals: Old Bridge is cautiously watching the agro-chemicals space where growth cycle may bottom out in another year, offering modest returns.

Real Estate: Kenneth Andrade believes real estate is in the early stages of topping out as companies are raising capital to ramp up land bank, which could send prices higher.

Infrastructure: Companies in this space that are involved in government projects have noted improved performance and working capital cycles. Within the entire value chain here, Andrade says project contractors and plays on commodity are key to further gains.

The private capex cycle is strong in industries like infrastructure, pharma, chemicals and automotive, which are ramping up new capacities, the note said.