Ratnesh Kumar of BOBCAPS sees no reason to worry for the market as structural and broader story is intact.
Consolidation gripped the Indian market after a stellar, one-way rally for almost a year. Between August and now, geopolitical tensions, lower than expected earnings growth pushed returns from frontline indices to a negative of 2 percent.
Should an investor be worried in such a scenario or treat this as a routing protocol on the market?
“On a year-to-date basis, we are up about 20 percent and India is one of the best performers. Certain phases of consolidation are quite natural in such a scenario,” Ratnesh Kumar, MD & CEO, BOBCAPS told CNBC-TV18. Further, he added that the gross domestic product (GDP) numbers and Q1 earnings growth were weaker as well.
Having said that, Kumar reiterated that there is nothing to worry about on a broader and structural basis. “On a 12-month basis, we could look at upside of 12-15 percent in broader market from these levels,” he said.
Kumar also said that earnings may see some recovery now. “As restocking comes back, you could have earnings growth in early teens in this fiscal that will drive the overall market performance,” he told the channel.
Currently, sectors such as building materials and retail-focussed financial sector franchiseesis are a good bet, Kumar said. In building materials segment, one could look at cements, pipes and ceramic space.
Positive refining cycle is expected in the oil and gas segment, along with steady profitability for the gas segment, he added.
In the non-banking financial sector, he recommends taking an individual and company-specific approach. In particular, housing finance companies will continue to do well, he added.
Kumar is also closely watching the commercial vehicles (CV) segment for next 2- months on back of decent numbers.
Meanwhile, he sees challenges continue for corporate banking. “Capex cycle is bouncing around the bottom levels. Also, it will be crucial to see how provisioning and resolutions steps play out in 6 months or so," he said.In case of real estate, he does not see much signs of pick up on the ground. In IT and pharmaceutical, global headwinds on demand side and regulatory issues will take a longer time to resolve.