Kotak MF’s Upadhyaya said that September and December could be slightly better quarters due to GST-hit sectors seeing some recovery.
As the market stares at issues of high valuation and lack of commensurate growth with fundamentals, Harsha Upadhyaya, CIO-Equity, Kotak Mutual Fund believes only a select few pockets are overbought. The market entirely is not expensive.
This, in the context of surged inflows of Rs 20,000 crore into equity mutual funds in August, is going to be a challenge for fund managers, Upadhyaya told CNBC-TV18 in an interview. However, one could look for stories in sectors with inexpensive valuations. Investors could well be cautious in such a scenario, he advised.
He pointed out to the slow growth trend reflected in June quarter results with no growth in export basket, and disappointing PSU banks' performance.
One must wait for September and December quarters, which could see better performance, he said. This could largely be due to sectors which are likely to see normalization of numbers, post GST disruption, in this and the next quarter. But, overall, he sees no major change in the economy.
Upadhyaya said NBFCs were expensive. “Almost all of NBFCs seem to be getting high and uniform valuation and it is not sustainable. It is better to tread with caution,” he told the channel. Investors must look at factors such as type and nature of business, and sustainability, among others, if they still look to venture in this.
A few factors driving NBFCs higher was the low interest rate regime and lack of PSU banks’ reach for retail credit. Strong bond markets helping in raising money at reasonable rates is an added positive.
Upadhyaya was positive on the aviation space as most issues are very benign and crude prices traded in a narrow band. The passenger growth is in mid-teens or higher in most cases and profitability is only about to move up as well as passenger segment.
He was also positive on construction, but advised staying away from firms involved in litigation. In fact, anything that could aid construction could be on its portfolio.
On oil and gas space, he was overweight as the sector continues to see steady demand growth. Gas utilities (such as Indraprastha Gas and Mahanagar Gas) are one of the most efficient ones. In fact, government’s policy push is also helping.Upadhyaya is cautious on the metals space as the government policies, supportive of pricing, could not exist forever.