Valuation has become a tad bit stretched, largely owing to a lot of liquidity in the market in terms of passive flows and domestics, said Shiv Diwan, co-head -- institutional equities, at Edelweiss Securities.
“I think it should take a bit of a breather over the next year and we do expect a broader market rally coming through after the budget,” he added.
Talking about midcap themes, he said, “It’s more bottom-up, more stock selection that we are betting on. It’s difficult to call out a sector currently. But we do believe a few stocks should look interesting. So JK Cement, KEI Industries, Inox and Godrej Properties are some of the names that we like.”
According to Diwan, the entire insurance space looks promising. "ICICI Prudential Life is our top pick in that sector, but if I have to choose one out of the 4-5 listed names, I choose ICICI Lombard General Insurance Company because the general insurance space is far more underpenetrated. Lombard is the largest player with 8.5 percent market share,” he noted.
“L&T is trading at valuations of about 15 times which is extremely low in terms of where it has traded over the last 3-4 years and I do believe that it is one of the pioneers when it comes to the infra and industrial space. If there is private or public capex coming back, L&T will be the frontrunner for that,” added Diwan.
“We think IT space will continue to give high single digit to low double digit growth. It continues to generate huge amounts of cash and in a market like this, they will continue to find flavour, they are the new defensives in the market and within the space we continue to like Infosys. We do believe that it will come out regarding the whistleblower issue and valuations are compelling,” he further added.