Upadhyaya prefers the cement space as demand is set to improve going forward, while pricing will also get better after the monsoon.
After a 10 percent fall from record highs, the market has managed to stage a bounceback in recent weeks. However, experts at Kotak Mutual Fund are cautioning on the valuation front.
“Valuations for the market are on the higher side overall. They are trading at multiples that did not exist historically. So, there is nervousness and there could be a cap on upside,” Harsha Upadhyaya, CIO—Equity, Kotak Mutual Fund said in an interview to CNBC-TV18.
He said factors such as higher global interest rates, strengthening rupee to the dollar and rising oil prices that could weigh on markets going forward as it has been currently ignoring these cues. Having said that, he feels one could look at largecaps as they are a better bet at this juncture.
Does this mean investors one could look at a different asset such as bonds based on their performance? Upadhyaya said this has to be an asset allocation call based on one’s risk profile and not necessarily a flight to bonds in the near-term.
Valuations, to him, remains key to stock selection. “Consumption growth had been strong in rural and urban areas, but choosing names in this sector depends on how they are placed. One has to take a bet accordingly.”
Upadhyaya remains bullish on the cement space as things are likely to improve from hereon. “Volume growth is coming back into the industry and pricing pressure could reduce after the monsoon.”
After the rally in IT stocks, he feels they still remain a defensive bet despite valuation concerns. “The window to buy these were when valuations were lower than the market. Right now, they are at par with the market. Hence, there is some caution. But given the headwinds, it may still be a defensive pocket to look at.”Valuation seems to be an issue with midcap IT. If growth does not sustain from this point, there could be a substantial correction, he stated.