Maintain positive bias on FMCG, cement, IT and private sector banking segment, says Kotak MF’s Harsha Upadhyaya

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Harsha Upadhyaya, Chief Investment Officer at Kotak Mahindra Asset Management is maintaining a positive bias on certain sectors and stocks.

In an interaction with CNBC-TV18 Upadhyaya said, “There has been extreme panic reaction across markets and asset classes. Panic has clearly spread much faster than coronavirus. While markets have been choppy and could remain this way as these are extremely volatile days, global cues are not supporting a recovery, so it is difficult to state that everything is fine or to figure out where the bottom is going to be.”

He added, “Investors need to be ready to withstand some volatility. Such phases can offer investment opportunities for long-term investors as they are not worried about volatility.”

Talking about specific stocks Upadhyaya pointed out that most of the segments have seen significant selling in the last seven to ten trading sessions. “Before that we were more comfortable on the mid- and small-cap basket, but today I think even large caps offer some kind of a valuation comfort – not everywhere but at least in pockets.”

He added, “There are a couple of emerging themes, for example we believe that the rural economy will start to show improvement before the urban economy. So to that extent, some of the businesses dependent on the rural economy such as fertilisers, agro-chemicals and consumption stocks could benefit in this phase.”

“Depending on where valuations are, some of these [stocks] could be investment opportunities. Similarly, there are many businesses that are insulated from what is happening in the globe or from a forex perspective or from interest rate perspective. These stocks do not have leverage on the books or they do not have any foreign linkage, for example cement continues to be one such sector, so there are pockets where you can still find good buys.”

Speaking about sectors he noted, “The private sector banking segment should continue to offer reasonably strong and steady earnings growth. FMCG should also deliver numbers, but in some cases valuations may still not be at comfortable levels because that segment has not really participated much in the fall that has happened in the last 7-10 trading sessions.”

Apart from this, Upadhyaya added that the IT sector could deliver reasonably steady numbers. “Cement is another pocket where we have seen pricing strength in the recent past and it has no real foreign linkages. It is going to be beneficial in the sense that if raw material prices like petcoke etc start to come off then that should benefit the sector in terms of margins. So there are pockets where earnings are likely to remain steady or at least be better than what the market on a whole is going to give. So that is where I think if the valuations correct, one could look at investing further.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow