Moneycontrol
Last Updated : Oct 26, 2018 03:34 PM IST | Source: Moneycontrol.com

Kotak MF's Nilesh Shah sees crude, elections as threat for market

Indian IT companies are currently taking baby steps but they need to take giant leap to show strong growth, Nilesh Shah of Kotak Mahindra AMC advised

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The market has been in a consolidation mode for a couple of weeks. The sell-off was largely due to fear of liquidity crunch in NBFCs, rupee volatility and rising crude oil prices.

Nilesh Shah, MD, Kotak Mahindra AMC, feels that if oil hits triple-digit levels, and if election results do not turn out to be favourable, then the current levels would be the final top for market.

Currently, Brent crude futures are trading around $82 a barrel — an over 25 percent gain year-to-date and 45 percent rise in last one year.

Talking about other global cues, Shah said the US Fed's move is more or less on expected lines, but there is uncertainty on the trade war front. US and China have imposed tariffs on importing some goods into their respective countries.

If some of the companies that are caught in the crosshairs of the tariff war prefer India as a manufacturing hub then the market would see a big rally, going forward, he added.

Elections

We are headed for elections at the Centre in 2019 and in many other states, such as Chattisgarh, Madhya Pradesh, Rajasthan, Mizoram, in the next one year.

"Predicting elections is tough as in 2004 and 2009 we lost because we did not predict elections results rightly," Nilesh Shah said. Over the long run, government and elections don't impact portfolios a lot, he added.

Bluechips

It were the bluechips and heavyweights that pushed indices 10 percent in July and August. "Bluechips have also corrected and most of the correction has proven to be great buying opportunity," Shah said.

Pain over for NBFCs?

He feels the market already priced in explosive growth in NBFCs. On asset side, there is a great opportunity but restriction are there from liability side, he believes.

NBFC growth concerns will remain till they diversify on liability franchise front. NBFCs that managed to raise money from various sources will see growth rerating but others may remain in bad phase.

White Goods

After increase in duty on 19 products by the government on Wednesday, Shah said in the white goods industry, there are more traders than manufacturers. "If these companies move to manufacturing then more value addition will improve their performance."

Currently, these companies are rewarded due to their brand and distribution power but over a period of time, if few companies set up their manufacturing facilities here, they will get manufacturing as well as distribution margin, and will be great stocks to buy with 3-5 years perspective.

IT Sector

Shah said IT stocks till now have been getting support due to buybacks. Rupee depreciation does not necessarily always impact IT stocks. "In fact, the value will come from their new areas like artificial intelligence, cloud computing, etc."

Indian IT companies are currently taking baby steps but they need to take giant leap to show strong growth, he advised.

Assembly Elections 2018: Read the latest news, views and analysis here
First Published on Sep 27, 2018 12:01 pm
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