Arvind Sanger, managing partner of Geosphere Capital Management believes that after such a massive rally, a correction is due in the Indian markets. He added that a 10 percent correction is very healthy and normal in any bull market.
“The correction is overdue and here is a fundamental reason for a selloff – the PE multiples are elevated because interest rates were so low. As interest rates adjust to a higher normal PE multiples have to come down,” Sanger said in an interview with CNBC-TV18.
Meanwhile, Sanger advises investors to look at cyclical unlock stocks again which in India are available at much lower multiples than some of the consumer darlings.
"However, if you are taking 3-4 year view the midcaps and smallcaps are the place to be because we are entering a period of strong growth cyclical, secular – whatever you call it; the Indian economy backdrop is pretty solid and so we are going to have a multiyear growth cycle which we have been missing for so many years,” he added.
Sanger further noted that globally, there is time to look at new emerging leaders in the market.
“Leadership is changing within the market. So one aspect is to look at the market and the market levels and other is to recognize that the leadership is changing and since the tech heavy names, let us take the US, are overweight in the market. Some of those may correct more but the ones that you want to buy may correct less but it would still be time to look at the new emerging leaders in this rally which are not necessarily going to be the highflying tech names,” he observed.
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