Indian markets are at their peaks mainly driven by the liquidity and expectation of a speedy recovery in the economy, Siddhartha Khemka, Head – Equity Research (Wealth), Centrum Broking Limited, said in an exclusive interview with Kshitij Anand of Moneycontrol.com. We would advise investors to keep booking partial profits at regular intervals, he said.
Q) What is your call on markets right now? It looks like geopolitical concerns and earnings back home are keeping bulls at bay?
A) Indian markets are at their peaks mainly driven by the liquidity and expectation of a speedy recovery in the economy. On the valuations side, although we are on the higher side, we are still not in the stretched zone, hence giving some comfort.
Our view currently is cautiously optimistic – cautious in the near term – positive in the long term. We would advise investors to keep booking partial profits at regular intervals and keep around 10-15 percent cash in portfolios to benefit (buying opportunity) from any fall in the market.
Q) How are you reading RBI’s guidelines on banking sector regarding NPA? Do you think banking sector is trading at frothy valuations? What should investors do?
A) The Reserve Bank of India (RBI) has been working on the NPA issues that has impacted the Indian banking space. While the valuations for some of the banks have been on the higher side, this is mainly due to the lack of investment opportunity within the sector.
These banks have not only been able to grow their business but also maintained healthy asset quality leading to sharp rerating of their share price.
Our advice would be same as above - keep booking partial profits at regular intervals and keep around 10-15 percent cash in portfolios to benefit (buying opportunity) from any fall in the stock price.
Q) March quarter season has been a mixed bag for D-Street? Do you think the trend will continue and we could see some correction on the back of high expectations of earnings growth?
A) As usual, the quarterly earnings are a mixed bag and are likely to remain so. Not only between sectors, quarterly results has been mixed within sectors as well. The trend is likely to continue.
For results which are weaker than expectations, the stock price could correct. Overall post the Q3 numbers which had been better than street expectations, the Q4 estimates seems to be on the higher side. Hence any disappointment could lead to some correction.
Q) What are your contra buys (sector or stocks) in the year 2017 and why?
A) We are positive on the pharma sector as a contra play and expect the current challenges that the sector is facing to be resolved by the end of the year leading to improvement in numbers as well as stock price.
The sector has done well historically. We believe that Indian companies would learn fast from their mistakes post the issues with USFDA inspections and would tighten their operations so as to clear any future regulatory action.
The current Trump administration rhetoric should decline by the end of the year leading to improved sentiments for the Indian pharma sector.
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