Cautious on NBFC sector, says Madhu Kela

Madhu Kela of Reliance Capital told CNBC-TV18, "You have to be very cautious what you are buying in NBFC because the fundamental thesis of consumer credit of housing finance of the cost going down for these companies, the cost to income ratio going down still stands. So, obviously, in the last two years back the overall NBFC sector was roughly Rs 5,00,000 crore. Today it is a roughly Rs 8,00,000 crore. So, lot of value has got created over the last two years." "Valuations were not as comfortable as they were two years back. However, it is not a complete sell. You can still find select pockets of good investment in the NBFC space. It is not a sector buy as a whole. However, you can still find companies but obviously now you can’t buy NBFC company keeping 3-6 months period for appreciations. You will have to have at least two to three years timeframe to make return," he said."However, time is there for a caution in some stocks which are trading at very high multiples whether it is price to earnings or price to book. I would not hesitate even to book profits in these companies if one is holding the stocks in their portfolio. Going by my past experience one must remember and when we buy stocks the prices have come down, so when we sell stocks price can go up." "However, that should not deviate a fundamental investor that if you are selling something at 7-8-9 time book value and if it goes because of the liquidity scenario because of the business flow it goes another 20 percent one should not feel nervous. So, this advice is not for investor who will feel very nervous that I sold out and I have left out because in this kind of thing you can never pinpoint that this is the bottom or this is the top. Some select NBFCs looks very expensive, there is no doubt about it."