In an interview to CNBC-TV18, P Phani Sekhar of Karvy Stock Broking shared his reading and outlook on the market.
Below is the verbatim transcript of the interview.
Prashant: I think you feel that the correction is imminent, 10-12 percent earnings growth is what you see, smallcaps are run up too much, market is looking heavy, what are your thoughts in the near-term, where are we headed?
A: Correction is always imminent. I am not so concerned on the largecap part but the broader market looks a bit heavy especially the smallcaps. The kind of run ups that we have seen in these stocks is phenomenal and in most cases, fundamentals are nothing home to write about. So I think there is a lot of participation enthusiasm which is leading upto this overall momentum and good sentiment in the market coming from this segment. That is something that investors need to be a little watchful about otherwise, largecaps are quite okay. So 5-6 percent correction here and there does not make a difference in the long-term investment hypothesis. However, it is the midcap and smallcap segment where people need to be careful.
Reema: Are you playing the Jio story, which is unfolding either by going long on Reliance Industries or adding to your exposure or conversely bringing down your bets in telecom stocks if you had any?
A: We have been cautious about telecom stocks for a very long time and Jio's entry in to the market has reinforced our perception that this market will bleed for some time to come.
Add the consolidation in this sector and it is good time for consumers but from an investors' point of view, we need at least one and a half to two years to see which way this camel is going to sit. So Reliance from its rest of the businesses point of view looks good but the recent run up primarily has been on the back of the excitement in Jio. That is something that while we are riding in our portfolios, we are not adding incremental positions out there.
Prashant: Earnings season is upon us, we will start with IT as always, any thoughts on what kind of numbers we should expect because if numbers surprise and commentary is good, you are in a good place in terms of valuations, they are not stretched or expensive as is the case in the rest of the market?
A: Numbers might negatively surprise because currency is the big spoiler here. So what one would like to see is the kind of commentary. Job addition has been miniscule. So one does not know whether automation has taken over big time or it is the dearth of projects that are ramping up.
So I think one needs a better idea on all those aspects but other than that you are right, valuations are the biggest comfort factor there and these businesses are not going belly-up or the need for IT is not going to evaporate. So I believe from an investor’s point of view, this might be a very good time to invest in IT stocks especially with rupee at multi-year highs.Disclosure: Reliance Industries, the parent company of Reliance Jio, owns Network 18 that publishes Moneycontrol.com.