We are selectively positive in financials, essentially banks which have good liability franchise.
The current market correction is looking worse than the one during 2008 financial crisis because of the way the stocks have fallen. The intensity of selling is much worse, said Saion Mukherjee, Managing Director and Head of India Equity Research at Nomura.
“We are dealing with a situation which is different and unknown at this point,” Mukherjee said in an interview to CNBC-TV18.
Here are his views on markets:
We find valuations attractive, whether we look at price to book, price to price of earnings on a trailing basis and even for that matter earnings yield and bond yield. Markets are much cheaper and therefore one selectively looks at across sectors. But till the time uncertainty remains we may not be aligned with the fundamentals and therefore there is a risk that valuations remain cheap.
Financials is one space which has seen the maximum damage. We are selectively positive there, essentially banks which have good liability franchise. We are taking a slightly longer term view with the assumption that at some point situation will be under control and therefore these corrections present an opportunity but it is very difficult to take a near term call.
Financial stocks have corrected quite significantly and this is a space where we are taking a slightly longer term view. This is a good time to look at names like ICICI Bank and Axis Bank.
Investing in large cap names
Pharma as a sector has been an underperformer even before the correction driven by corona virus in the last 3-4 years since the crisis erupted in the US market. Given the fact that there is potential supply disruption, it is possible that the manufactures may get back some of the pricing power which was completely lost and along with that the rupee kind of helps.
Companies which are going or have gone through difficult times are likely to implement cost control measures and may end up surprising the street on the positive side as far as earnings are concerned. From a historical perspective the valuations are attractive which one can be overweight on both from short term as well as from a longer term perspective.
View on the FMCG spaceThe operations in the FMCG space are not that impacted. In fact some of the consumer companies can end up benefiting from the fact that the raw material prices could come down and there can be upliftment in margins. Visibility is much higher than some of the other sectors. But we are underweight on the consumer space because of valuation. As and when the recovery happens, the FMCG space is likely to underperform the broader market.