Foreign institutional investors (FIIs) had raised weight on IT in June by almost 90 basis points (bps) and moved out of banking by nearly 75 bps, said Vikash Kumar Jain, investment analyst at CLSA in an interview with CNBC-TV18.
He believes, the market is at the cusp of reversing this shift. “The flow in June was in IT, but we believe that we might be at the cusp when all of this reverses in the coming months in favour of banks. We like banking a lot more, we have reduced our weight on IT last month. As confidence in playing the core economic growth rises, with vaccination picking up, continued relaxation of state lockdown on a gradual basis and the banking results coming in this time, may allay the worst fears – and may also trigger a shift back into banking and from IT as well,” he explained.
Within the overall banking space, he likes large corporate banks the most. “Within banks, we would want to be focused on two kinds of banks. Larger banks are the ones where there is significant buffer provisioning and that is where we are more comfortable at this stage. Even amongst the larger banks, there is this set of banks largely that are typically known as corporate banks, which saw a pretty big derating over the last five-seven years. With all of the larger part of the corporate stress behind us, that is the place where there could be a sharper rerating as well. So, we like large corporate banks the most within the overall banking space,” he shared.
He thinks growth will be back strongly after the pandemic, which means there could be inflation, which will be the focus area. There will also be some increase in yields globally.
“If you were to use that backdrop, the best placed sectors are commodities and financials,” he added.
According to him, the narrative of the current upmove in the market is to play the post-pandemic recovery. “That narrative strengthens in the coming months as vaccination picks up and the lockdowns are also reduced overall. I would say till we get into some kind of a reality check on how the post-pandemic world looks like – which is possibly sometime in the second half of this fiscal – I don’t see too many negative triggers for the market,” he stated.
Jain likes real estate. “From a perspective of a couple of things – the residential space is definitely looking good and there is consolidation. Our more preferred picks are not the largercap names but the more midcap kind of names in realty,” he further mentioned.
For the full interview, watch the accompanying video.
(Edited by : Dipika Ghosh)
First Published: IST