Constructive on markets; positive on financials, IT services, healthcare: Bernstein's Venugopal Garre

Venugopal Garre, Managing Director at Bernstein is constructive on markets.

“We are okay with the consolidation phase and at the same time we will be constructive on the markets from a 12-month view,” he said in an interview with CNBC-TV18.

“Once these COVID issues, which is becoming a challenge will subside you will see a broader normal economy coming back. Supply side also will get enough time to respond to the changes,” he said.

From a sectoral standpoint, he is positive on financials, industrials.

“At the same time, we are primarily positive on IT services and healthcare. You can probably call them relatively safer sectors. We see both of them having their own cycle which is the reason why we are not just into domestic recovery. We are overweight into these four sectors. We are underweight on autos and consumer staples,” Garre said.

He believes there is a positive cycle emerging and it will last for a couple of years.

“The flavor of the cycle has to be different this time around. It cannot be the same FY03 to FY07. I do not believe we are going to see excess investments in either industrial capex or infrastructure. We do not believe that the private sector would go and be able to raise so much money that they can get back into investing in road infrastructure or a metro infrastructure. These are areas that are proven to be not so good from a return perspective. So the financial sector has seen almost a decade of challenges and is also going to be careful when they lend to such things,” he added.

Garre sees IT services and industrials are still having implied growth rates in the mid-single digits which is lower than what potentially they can deliver and they have delivered in the past.

“So they appear cheaper,” he stated.

“In the case of autos or consumer discretionary or consumer staples we are seeing a situation where implied free cash flow is pretty much at or above the growth rates they can deliver. So they appear costly,” he pointed out.