The stock market is at an fascinating juncture the place it’s constructing a wholesome recovery. From right here on, for the recovery to maintain, developments on vaccination, and continued financial recovery shall be vital, says NAVEEN KULKARNI, chief funding officer (CIO) at Axis Securities, in interplay with Swati Verma. Edited excerpts
Your view on the current market.
The market is at an fascinating juncture the place it’s constructing a wholesome recovery. However, it has been fairly sceptical about the recovery in the banking sector as the challenges of collections proceed to persist. Q2FY21 will present a higher image of the state of company earnings and recovery. Q1FY21 indicated that the Indian corporates have managed to deal with Covid-19 challenges higher than expectations. Now, it’ll rely upon how Q2 earnings form up. Our floor checks point out many industries have managed to come back again to pre-Covid ranges which are additionally getting mirrored in the stock costs. From right here on, the recovery to maintain, developments on vaccination, and continued financial recovery shall be vital.
Your tackle mid and small-cap stocks after Sebi’s newest rule on multi-cap funds.
We have been of the perception that small and midcaps will carry out as valuations past the high 15 stocks are fairly enticing and the underperformance of small and mid-caps which began in early 2018 was coming to an finish. The Securities and Exchange Board of India’s (Sebi) ruling is appearing as a catalyst for the efficiency of the small and mid-cap stocks.
Is it nonetheless a good time to enter info expertise (IT) stocks?
IT stocks have been anticipated to re-rate and that’s taking place now. The steering of IT firms has been fairly encouraging. So, from a perspective of regular returns, IT stocks are a good bet to enter even at the current ranges.
What’s your view on the pharma stocks? Do you see extra upside?
The pharmaceutical sector is in a structural uptrend and that pattern may maintain over the medium time period. The sector is prone to see an enchancment in return ratios from right here and stocks like Dr. Reddy’s, and Biocon will proceed to ship good returns.
Your view on RIL. It has performed a important position in lifting the benchmark index. Is it nonetheless a purchase?
RIL is into a fully completely different zone with fundraising and overseas itemizing plans of its subsidiaries. The bulk of the returns have already come. Returns from current ranges will rely upon triggers like the itemizing of Jio or retail enterprise.
Your expectations from September quarter earnings.
September quarter earnings shall be crucial as the influence on the banking, monetary companies, and insurance coverage (BFSI) sector shall be considered one of the crucial components. Overall, a decline in earnings is probably going however enterprise recovery administration commentary will maintain the key.
What are the sectors/stocks you are bullish and bearish on and why?
Our key optimistic sectors are IT, Pharmaceuticals, Staples, Chemicals, Agri, and Automobiles the place we count on recovery and traction of recovery to play a key position. We are underweight on industrials and infrastructure the place recovery appears elusive.
One sector/theme that may emerge as a darkish horse this yr.
Cement can nonetheless be a darkish horse as the sector earnings rely upon pricing actions than simply quantity recovery. Historically, the sector has demonstrated good pricing self-discipline. Thus, if pricing sustains, the sector may nonetheless ship good returns.