Life insurers, asset managers and brokers, among others, could be a ‘decent play’, but keep an eye on valuations, says Saurabh Mukherjea.
Even as the market seeks to steady itself after the 10 percent fall seen from January highs, market experts believe indices still continue to be overvalued.
“The fair value for Nifty is around 9,000 and 30,000 for the Sensex. Whether that fructifies next month or year remains to be seen, but they are currently overvalued against the fundamentals,” Saurabh Mukherjea, CEO of Ambit Capital told CNBC-TV18 in an interview.
Even from the earnings season, he does not much of an uptrend in this quarter. “The recovery will happen next year and FY19 should see double digit earnings growth. Given RBI provisioning norms and bond yield movements, among others, there could be challenges for the banking space,” he told the channel.
Speaking on banks, particularly on the corporate lending side, Mukherjea said that it is high time investors realised no one has made money them. “If you don’t have a business model for corporate lending in India, then how do you talk about their valuations? I am not sure of any bank in India that has shown that it has made money from corporate lending,” he said.
Meanwhile, in the overall finance space, he finds opportunities in the financial savings theme. Life insurers, asset managers and brokers, among others, could be a ‘decent play’, but keep an eye on valuations. He highlighted a report by RBI, which stated that 95 percent of Indian wealth have were in physical assets.
On the IT space, he said that it is a must for every portfolio to have at least one frontline stock. “A combination of super cash flows, currency weakness and Western nations’ recovery suggests that one IT stock must be a part of portfolio,” he added.Mukherjea also sees opportunities on the basis of government spend on rural sector this year. Tractors, FMCG and two-wheeler names, among others, are a story to play out in 8-9 months. Metals and mining is another sector to look at, he said, adding that one could use it to profit from an overall metals recovery. Having said that, he is asking investors to be cautious on corporate governance champions.