We are not in a bear market; insurance stocks good bet for long term: Envision's Nilesh Shah

Sectors

Envision Capital has not entered into any new positions for last 6-8 months, though the market corrected significantly, he said, adding the firm maintained liquidity with itself.

Despite this correction, he does not feel valuations are cheap enough right now. "Interest rate is going up, bond yields are going up which still make the case that valuations may see more correction but long-term fundamentals still remain attractive."

Debt and NBFCs

Recently, IL&FS defaulted on several interest rate payments to bondholders, which raised fear of liquidity crunch in the debt market and forced redemption pressure in select mutual fund houses, which hold debt funds in their portfolio.

Hence this resulted in the freezing of liquidity by banks for NBFCs. "I think we will see a lot of surprises as debt market is credit market and a large part of revenue for banks come from lending to NBFCs, hence the freezing may not last for long," Nilesh Shah said.

He feels quality NBFCs will manage to get lending after sometime and survive smartly but other will suffer more.

In terms of stock price correction, he said a lot of concerns seem to have played out but that does not mean these stocks are cheap. "We are not buying it as we still see some more selling pressure and these stocks are over-owned."

Many of non-banking finance companies have corrected up to 50-60 percent.

Shah said the growth for NBFCs may come down from 25-30 percent earlier to 15-18 percent and then there could be a call for de-rating. "But in terms of regulations, we are far better than 1995-1998 period when Bhansali scam too place."

He feels top 3-5 companies may remain strong after this current shake out.

Auto

The Nifty Auto index corrected nearly 19 percent in last one-and-half-month due to mixed sales trend for August and September.

"The reality is that these companies grew in single digit barring one and valuations were also much higher. Hence these stocks corrected," Shah said.

He further said the growth in auto space will be tepid for one or two quarters which the market seemed to have started pricing in and multiples will also come down.

Once there is normalcy in lending, consumers' buying pattern, etc., Shah said, auto space will see attractiveness.

According to him, the auto sector is expected to see another 10-15 percent correction and then there could be long-term buying opportunity.

Insurance

Shah said Insurance already corrected a lot about 35-40 percent and if the market corrects further then these stocks will also correct but look strong with 3-5 years perspective.

The reason for betting on insurance is that he does not see any significant slowdown in the sector going ahead. Overall growth, operational parameters are going to be strong, he said.

Banks

He said even after top 3-5 large banks corrected 10-15 percent recently, valuations are still high. Once these stocks correct further then there could be a buying opportunity.

IT

Frontline IT companies have already played out their role in terms of stocks performance, he said. He believes they will report good numbers for a couple of quarters on strong tailwind of the rupee.

TCS, Infosys and Tech Mahindra rallied 60-70 percent in last one year.

The time has come to sell frontline stocks, which may also reflect in midcaps, he said, adding, after a steep correction, there would be long-term opportunity in these stocks.