Sensex, Nifty witnessing the birth of a bull run, says Kotak's Harsha Upadhyaya

Kotak's Harsha Upadhyaya said he's bullsih about defence stocks.

India's stock market is at the beginning of a bull run, and the gush of liquidity is providing investors with opportunities to seize. Harsha Upadhyaya, the Chief Investment Officer at Kotak Mutual Fund told CNBC-TV18 in a conversation, that he is sees a trend of valuation gap between largecaps and broader market stocks narrowing. This may continue further, as he reiterates that India is just at the initial stages of a prolonged bull market that may lie ahead. The small and midcap indices have outperformed the larger benchmarks during the current quarter, lending strength to the trend of narrowing valuation differential.

Another reason for his confidence of a sustained market rally is that the foreign inflows have almost touched $10 billion, and domestic institutional investors too are seeking opportunities to invest despite markets being at record highs. Harsha added that while market fundamentals are yet to change, the liquidity points to bullishness in the markets. However, he added, “one should also keep questioning at every point of time, whether the markets are getting slightly ahead of fundamentals, in the very short term”.

The CIO of Kotak Mutual Fund had a word of advice for investors He highlighted that when a market driven by momentum goes up, several stocks that are fundamentally not strong also tend to rise, hence investors must be cautious in picking stocks having higher risk to reward ratio.

Talking about the monsoon, Harsha believes that the market is not giving due credit to the potential delay that may impact agricultural output, and thus adding to the inflation scare.

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'Going by the past years, an above 6 per cent deficiency in the monsoon has not bode well for the economy', Harsha added. 'Although we are in the early stage to predict this, the surging market still need to stay cautious of the monsoon delay', he further goes on to mention.

When quizzed about his preferred sectors to bet on, Harsha said he is bullish on the defence stocks from the long-term perspective. For the short term, he flagged caution as the stocks are discounting all the upside seen in the market currently.