Market on firm footing; expect cyclical recovery in IT stocks: Hiren Ved of Alchemy

The market is on a firm footing and looks like nothing can disturb it at this stage -- it's climbing every wall of worry, says Hiren Ved, Director and CIO, Alchemy Capital Management.

Globally too, we are in a classic phase of melt-up and as long as global equities keep moving the way they are moving, there is no reason why Indian market should not follow suit, he adds.

"So, just stay invested in your high conviction names and don't chase market just because its going up -- be mindful of what you are buying at what price," advices Ved.

However, corrections remain a risk for the market because even in a raging bull markets, there have been 10-20 percent corrections do take place because that is the nature of the market, says Ved.

The only thing amiss is that he relative valuations or the premium of small and micaps to the largecaps is at the highest one has seen in many years, so there has to be a mean reversion that will happen, says Ved, adding that when it will happen, one does not know.

He is cautions on the midcap and smallcap space because of the froth in them, but says there are many individual opportunities that one can make investments in that space.

When asked about his view on the proposal of 100 percent FDI in banks, he says FIIs have always favoured private banks and if the proposal were to become a policy then there is more headroom for private banks. The immediate beneficiaries would be the leading private sector banks like HDFC Bank, ICICI Bank, Axis Bank. Moreover, the market is turning and the corporate banks and which were lagging could see increased interest and investment in them, and also impact the valuations of these banks, says Ved.

Talking sector/stock specific, he says largecap IT does offer value along with some select midcap names. The US economy, which is largest market for IT companies is looking buoyant and corporate tax cuts there could prompt large corporates so spend more on IT, says Ved, adding that one can expect cyclical recovery in IT stocks going ahead.

He also expects lot of consumer companies to benefit because of their large distribution infra from GST because they can sell any number of products through their same distribution channels and therefore the return on capital for them will go up. Therefore, several consumer companies like Varun Beverages, HUL etc will reflect the efficiencies gained from GST.