Some valuations unjustified, bet on services that offer global footprint, says Kenneth Andrade

Kenneth Andrade added that there is a need now to change the narrative. "We need to find companies that will dominate the international landscape. IT services have proven that, so, find industries like these."

Kenneth Andrade of Old Bridge Capital is exploring bets in the services space that are capable of dominating the international landscape, and suggests IT services and Pharma as spaces that can emerge as winners in the global economy.

In conversation with CNBC-TV18, the founder and CEO of Old Bridge Capital said that some cyclical stocks are trading at valuations that can’t be justified, but he is not turning bearish on manufacturing, a space that he has been talking about, in the past. However, Kenneth now sees concern on valuations that some of the companies are trading at.

"It will be a little challenge to extrapolate returns in the same space, as they are at valuations and market cap in a cyclical industry which some of them do not deserve. I am not bearish on manufacturing, we will still be one of the fastest growing countries in the world, and the momentum will continue for the next couple of years," said Kenneth Andrade.

Kenneth Andrade added that there is a need now to change the narrative. "We need to find companies that will dominate the international landscape. IT services have proven that, so, find industries like these." Andrade advised investors to look for companies or industries that will create an international footprint, and do so without any Government help or subsidies. "That is how we are looking at our portfolio from 2024-2030," said Andrade, adding that he has bias towards services, especially companies that have the skillset to win in an international economy.

Andrade said his fund has large exposure to Pharma, and he is not ruling out businesses like aviation. "Valuations are pricey, over next year or so, and the breadth of the market has to narrow down quite considerably," Andrade added.

Andrade added that he has been voicing concerns over valuations for the last one year, however, as markets keep scaling new highs, the point on valuation now 'doesn't really matter'. The construct of the market is such that most of the negative will come from outside India, he said. "US is now trading at 65% of the world market capitalisation and we have not had that kind of polarisation before," Andrade said, highlighting the skewed share of US equities in the global market capitalisation. Going forward, Kenneth bets the rally will get even narrower. "Over the next 2-3 years, the market breadth would get extremely narrow. We have a positive bias on the economy, but a large part of that is priced in. Largely, valuations now have to course-correct over a period of time." However, there is no way time this, he added.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.​​​