Prefer banking, NBFC stocks: Phani Sekhar

P Phani Sekhar of Karvy Stock Broking told CNBC-TV18, "When the investment cycle starts picking up ideally you look at capital good stocks and then you look at contractors etc. However having said that for quite sometime now for more than six months many of these stocks are more than fairly valued. Even if you expect investment cycle to pick up in the normal course then I do not see any major upsides accruing to the investor who is going to buy them now unless you wait for declines and buy them."

"I do not expect at very dramatic overnight improvement in investment cycle it will improve gradually. With gradual improvements gains will also happen gradually. So to that extent it is not a great idea to chase some of these typical investment cyclicals. While I am still a firm believer in banks and financial services, not just from a pre investment cycle point of view even when the investment cycle improves because one should remember that the investment cycle will be funded by at least 70 percent debt and the banks if they can make return on equity (ROE) of around 17 to 18 percent from the trough then it is a good idea to buy them, rather then the investment cyclicals which actually struggle to make even a 14 percent ROE," he said.

"Banks and non-banking financial companies (NBFCs) will remain favourites but cap goods and on a case to case basis the construction companies can be looked at lower levels."