Sanjeev Prasad of Kotak Institutional Equities said investors can make earn huge returns in corporate banks with a six-to-nine month perspective
The market fell sharply for the second consecutive session on Monday, losing more than 400 points on the Sensex in two days and breaking below 11,400 on the Nifty on global concerns.
Major Asian markets extended Friday's sell-off, losing more than 1.5 percent, as investor sentiment took a hit after a further sharp fall in the Turkish Lira.
The Lira is in freefall after US President Donald Trump last week approved doubling of metal tariffs against Turkey. The currency corrected about 16 percent against the dollar on Friday and about 9 percent today.
The news has forced investors to remain cautious but experts feel the same is of not much significance to India as well as other Asian markets.
"Turkey is just one factor, there are several global uncertainties. One should look beyond Turkey. The issue could be contagious to emerging markets which have a higher current account and fiscal deficit. India's external debt-to-GDP ratio is not high, so the contagious effect will be limited," Sanjeev Prasad, Co-Head at Kotak Institutional Equities, said in an interview to CNBC-TV18.
He feels apart from US-China trade war concerns, the movement of crude oil prices is an important factor to watch out for after the US imposed sanctions on Iran. The latter contributes one-fourth of global crude supply. Trump has asked countries to cut Iranian oil imports from November.
Every $10 a barrel increase in crude impacts India's gross domestic product (GDP) by 50 basis points. "Crude at $80-90 a barrel is a hurdle for India, which imports more than 80 percent of its oil requirement. As we are heading into general elections next year, investors need to watch out for crude oil prices and fiscal deficit closely."
Prasad said the broader market has sold off compared to frontliners. "Look at various indices. The Nifty has gained 8-9 percent this year and is up a percent in dollar terms. The Midcap index is down about 8-9 percent, but more so in dollar terms. The smallcaps has fallen more than midcaps."
Elections in three states - Chhattisgarh, Rajasthan and Madhya Pradesh - will take place in December. He feels the market will start focussing on this two months before these elections. "If the BJP loses one out of three, then the market will take it in its stride. But if it loses two out of three polls, then that could be a bit of problem. If it loses all three, then that would be a catastrophe for the market and investors may start worrying about general elections." But he expects BJP to win two out of the three state elections.Corporate banksPrasad said investors can make earn huge returns in corporate banks with a six-to-nine month perspective but not in the next two-to-three months.
He feels the dust in corporate banks will settle in the next few weeks. "The non-performing asset cycle is going to end soon. Provision coverage ratio is at reasonable levels. The same especially for state-run banks will soon cross 65 percent and hence the de-rating will stop in the next couple of quarters. There is value in corporate banks."He also sees value in metals and oil & gas stocks.