According to Manish Sonthalia, Head Equities-PMS, Motilal Oswal AMC, direction of the market is definitely up but there will be sharp corrections in the interim.
“You are likely to see corrections and they will be swift and sharp more so in the broader market,” he said, in an interview with CNBC-TV18.
If one has a two-three year time horizon, it's the time to lap on to the stocks that one has always wanted to buy but were constrained due to valuation concerns.
“It is a buy on dips market but there will be intermittent corrections,” he added.
Semiconductor shortage has been the main concern in the automobile sector. It is reducing the margin, production is improving slowly and gradually, he noted.
“There is no dearth of demand in the system. I would not be a seller in automobile stocks at all from the next six-twelve months point of view. All the negatives are primarily there in the stock price. It would be a buy on dips as far as auto space is concerned,” he said.
According to him, the acceleration of IT sector happened due to COVID-19 pandemic, which is irreversible.
“I would believe that if there is a third wave then there would be a knee jerk reaction on the downside but IT spends are unlikely to slowdown significantly. From that point of view, demand is just too strong and I don’t think that the third wave or a temporary lockdown again can reverse this,” he explained.
The growth in the diagnostic space from the sector point of view is going to be a good 18-20 percent for the next 4-5 years.
“However, the valuations of the diagnostic space are just too prohibitive. I would not believe that there is too much of upside in the diagnostic space even though with the new variant now, there is going to be increased testing. RT-PCR and all of that becomes mandatory – these margins at 28-30 percent are not sustainable on a long-term basis and the growth in the sector is going to be 18-20 percent,” he said.
He believes there is reasonable upside in the technology space, healthcare, consumer and financial services space in the next one-two years.
“That remains the key four sectors that are likely to lead the markets on the upside and one would do well if they buy on dips in these four sectors,” he said.
Metals would start looking up from the week around the Chinese New Year, he noted.
“When landed cost is lower than the domestically produced steel, you will have pressure on prices. Of course, the whole expectation is that around the Chinese New Year, consumption in China is going to move up. That is going to support steel prices. So valuations are extremely comfortable, steel as a sector is going to remain soft for the next six months,” he explained.
For the full interview, watch the accompanying video.
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