Harsha Upadhyaya of Kotak MF is cautious on the sector and advised investors to be careful after recent rally in stocks.
The benchmark indices have spiked sharply in the last few sessions with the Nifty moving closer to 10,400 levels. It rose nearly 8 percent before seeing correction on Thursday.
The broader markets also recovered, but are still down more than 10 percent year-to-date.
Kotak MF's Harsha Upadhyaya expects consolidation in the market for next couple of quarters and does not expect large returns during that period.
While advising, he said one should take 3-5 years perspective rather than for few quarters or one year. "Elections would be great time to accumulate for good returns over next 3-5 years."
The flow in mutual funds have been moderated for last couple of months compared to beginning of the year.
"Yes that is true, but SIP (systematic investment plan) continued to see good flow and will continue as well," Harsha Upadhyaya, CIO Equity, Kotak MF told CNBC-TV18.
He said Monetary Policy Committee's decision to hike repo rate by 25 basis points to 6.5 percent is on expected lines considering inflation concerns.
Further rate hike is unlikely at least in the near term and any hike from here on would be data dependent, he feels.
The fund house has not made any changes to its portfolio as far as rate sensitive stocks are concerned, he said.
He is cautious on the sector and advised investors to be careful after recent rally in stocks.
In case of volumes, he said one should not look at only July numbers as these have favourable base due to GST disruption in year-ago quarter.
He further said on top of that what is disappointing is their June quarter earnings which are below expectations across the board. "Margin pressure is clearly seen in numbers, so that is definitely a matter of concern, so one should be cautious."
Upadhyaya feels overall earnings are more or less in line or slightly better than expectations. "IT and retail private banks' numbers are good. For corporate lenders, normalisation of credit cost will be seen in FY20."
Consumer discretionary and staples continued to see good numbers with double digit volume growth but the big disappointment is from auto sector, he said.
FY19 earnings estimates
Kotak MF had expected Nifty earnings per share growth at Rs 600 for FY19.
After this earnings season, Upadhyaya said it would be difficult to meet that level, so earnings growth may settle around Rs 550 level. "Market is quite elevated in terms of valuations on these earnings estimates."
Kotak MF has been maintaining its underweight rating and will keep it the same for long term.After current earnings, slippages and NPA seem to have peaked out, so from here on these things would be keenly watched and then the fund house will take a call, Upadhyaya said.