The weakness seen in Q2 of financial year 019 will continue even in Q3, predicts Gautam Trivedi, co-founder and managing partner of Nepean Capital.
"Earnings remain a big concern, Q2 earnings were weak and earnings in Q3 may also continue to be weak because it will bear the full brunt of higher crude prices and the currency," he said, adding "the market is not expecting a rate hike from the RBI, so the policy may not be a big event".
Trivedi said there are a bunch of positives for the market in terms of falling oil prices, currency stability and a huge revival in consumption demand.
Overall situation in the economy is also improving, he said. "Aviation companies are seeing an improvement in plant load factor. So, one is seeing positive greenshoots in the economy further aided by lower oil prices and stable currency."
Talking on the political set up, he said the market has priced in a BJP loss in Rajasthan and win in Chhattisgarh and is divided on Madhya Pradesh but it has not priced in a loss in MP.
"The second concern is that bull run in the US may not last long and any major slowdown in the US economy and any major correction in their equity market could have an impact on all markets, no market will be spared because US accounts for almost 55 percent of global equity market cap," said Trivedi.
Sector specific, he said between now and May of 2019, they would keep a defensive portfolio. "So would buy IT, select pharma, consumer names and private sector banks like Kotak Mahindra Bank, IndusInd and HDFC Bank but would wait to put money into ICICI Bank and Axis Bank."
He advised investors to avoid the Housing Finance Companies and NBFCs having exposure to the realty players because the demand for real estate is down significantly.