CLSA is positive on real estate and has seen encouraging signs of recovery in the coming days, Mahesh Nandurkar, India Strategist at CLSA, said in an interview with
He added that the real estate sector turnaround is only a matter of time.
On markets, Nandurkar said: “The reason why the market has given up the gains post corporate tax cut is the economic data points continue to be negative and we continue to see data points which show that the slowdown is sharper than what it was thought to be a month ago or a few months back.
“Therefore, on the economic side the outlook is not pointing towards any immediate recovery as such. We would have to wait for 2-4 quarters, but the market outlook doesn’t have to be strictly correlated with the economic outlook because there is PE multiple as a factor and while the economic outlook is not that great with the next couple of quarters view, the market outlook is much better in my view because of global liquidity, valuations etc.,” he added.
On non-bank finance companies (NBFCs), he said: “Some of the top tier companies in the housing finance space should definitely see the benefit of market consolidation, mortgage rates going down and therefore, some kind of a pick-up in demand and if we begin to see recovery in property market then that would augur well for the top tier NBFCs or HFCs.
“I would broadly categorise the NBFC segment in two parts. One is the lending financials and the non-lending financials and the non-lending financials which includes life insurance, AMC [asset management company], general insurance looks much more promising,” added Nandurkar.
On domestic economy sectors, he said: “In general, I would continue to maintain 'underweight' stance on consumer-oriented sectors which not only include staples but also discretionary and autos.
“Yes, there can be a case for selectively buying some auto names especially in the passenger vehicle segment. Broadly, I am going to retain underweight position on autos and consumer sectors in general because a much stronger underlying trend in the economy is that interest rates are going down and I believe there is a lot of room for those to go down and in that kind of an environment I would like to go with banks or sectors which are more linked with investments like property or housing finance,” he added.According to him, the government is capable of taking bold reform oriented steps to boost sentiment.