Outlook for the Indian stock market for 2020 was lot more positive and the market has already positioned itself in the last 2 months for a much broader rally, said S Krishna Kumar, CIO-Equity at Sundaram Mutual Fund.
Initial triggers from various manufacturing companies indicated that production schedules were up and over the next two-three months it was expected to be quite robust compared to the first half of the year, said Kumar.
"There is an incremental belief across money managers that we are bottoming out at this point in time," he said.
"With the kind of a broad basing of growth across driven also by certain amount of government spending that has been happening and liquidity push in terms of settlement of various dues and GST refunds etc., there is a lot more liquidity system at this point in time and we are hopeful that the money multiplier will improve in the next couple of months as we go forward,” he added.
He further said that lower interest rates was another positive for mid-cap companies. "We do look at, fundamentally, the valuations. Across the space there is a lot of damage to prices that have happened in the last 2 years and even this year the mid-cap indices are down about minus 4 to minus 8 percent, mid and smallcap indices, whereas the largecap indices are up."
"So, with the PE multiples and price to book multiples, more towards historic lows particularly on price to book side which are good indicators of value because during depressed earnings looking at a PE multiple would look inflated. So on PE multiple on depressed earnings numbers are looking, valuations are looking good.”
Across the mid-cap space the impact of improved showing in the auto sector, which, he said, will happen in the passenger cars, utility vehicles (UV), two-wheelers and the tractors in the next 12 months.
"We believe auto ancillaries which are a big supplier to this industry has been a segment which has been trashed badly and we see a good improvement in valuations as earnings get upgraded,” added Kumar.
Similarly in the cement space, there was a very weak outlook in terms of volume etc, in the last 6 months. "What we are seeing now is that in the last few months there has been improved government spend and we do believe that some of the government measures are pushing the real estate projects into completion etc, will lend more growth momentum to the cement space; cement and building materials."
So, cement and building materials were fairly looking attractive on earnings which were not robust at this point in time, Kumar further added.
"We also believe many pharma stocks are looking good post recent correction, " said Kumar.
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