Saurabh Mukherjea, founder, Marcellus Investment Managers, believes the market is still overvalued and adds that 9500 on the Nifty would be a fair value for the market, given the bleak earnings outlook for this fiscal.
According to him, although the slowdown in the economy is not rapid, the industrial production data, auto sales, the CPI data suggest that the economy has lost steam in the last 4-5 months after hitting on a fair growth in Q1.
“It is a slowing economy and suggests that the Reserve Bank of India should push through a rate cut, perhaps 50 basis points cut in February but my reckoning is that until the elections are done, we will be in a sluggish economy," he said.
"Would buy the market wholeheartedly if it hits 9500 but until then it's selective buying of well-run companies, consistent compounders. I don’t see value in overall market” said Mukherjea.
Talking about the upcoming budget and fiscal deficit, he said it is unlikely that the government will meet the 3.3 percent fiscal deficit target and so whoever comes to power in July will have to do fiscal belt tightening given the challenge state of India’s financing.
"The big announcements in the budget will be about flagging to country as a whole that if you elect us, these are things we can do for you on the other side – things like universal basic income for people below poverty line, focus on direct tax code, lower corporate tax rates, and raising income tax slabs for middle class etc.," said Mukherjea.
Sector specific, he said within consumption, anything where financing is involved like autos, big ticket electrical items, etc. will hit a rough patch on tight liquidity conditions and would be in troubled territory for the next 12-24 months.
"However, small ticket consumption spaces like paints, FMCG would see robust growth further aided by government’s rural spending. Companies like Marico, Pidilite Industries, Berger Pains, Asian Paints, etc. are well placed for next six months or so," he said.
From the IT space, the house is bullish on TCS and they also like Indian pharma from a valuations and fundamental perspective. The house is upbeat on Dr Reddy’s.
From financials, he said they have never considered investing in PSU Banks in last ten years but are bullish on HDFC Bank, Kotak Mahindra and also like City Union Bank among the smaller ones.