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The market is ripe for picking quality stocks but also to stay clear of high leverage play as well as operator-driven stocks, Ajay Srivastava, CEO, Dimensions Corporate Finance Services said in an interview with CNBC-TV18.
The S&P BSE Sensex pared gains in the last two trading sessions and eventually closed in the green largely led by weak global cues.
“We need to look at global cues because Indian market is getting more correlated with the global market. Therefore, if I would be a buyer in this market, I would be buying a larger set of companies and not in the smaller set of companies,” he said.
“The economic scenario has changed for mid and smallcap stocks post GST given the fact that they have been put up at a great disadvantage which will play out in the next 12-18 months. Companies which are highly leveraged in the midcap space will suffer a lot,” said Srivastava.
Srivastava said liquidity has been a major issue for the pharma sector. On the regulatory front, apart from concerns over USFDA, Indian government policy to bring down prices of pharma products is a key trigger for the downside.
The sector could phase severe price pressure, especially in the local generic space in the next 24 months which will be a key overhang on the sector much more than lingering concerns over USFDA.
The affordable housing or the real estate theme is a good story because demand is coming back, but it requires some patience on the part of investors. To be on safe side, investors should stick to top 6-7 companies in the real estate sector.
FMCG sector which is likely to benefit the most from the implementation of GST is not something which is on the buying list of Srivastava. “There is huge price pressure and contrary to what people think volumes are not picking up,” he said.
“After the GST boost, rates have been capped in this sector which is beneficial. The story will play out in the next two-quarters, and investors will see that it is not the sector to bet for above market returns. ITC is not a pure-play FMCG story, but it is a pure play on divestitures that may happen,” said Srivastava.
For entire interview, watch accompanying video.
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