Too early to call this a beginning of correction; can selectively buy IT, pharma & FMCG: Ambit Capital

Saurabh Mukherjea

CEO | Ambit Capital

• Too early to call this a beginning of correction; can selectively buy IT, pharma & FMCG: Ambit Capital

• Go long on bottom decile of top 100 stocks & short top decile: Saurabh Mukherjea

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Selling pressure in the Indian market spilled over from Friday’s moves, with the Sensex and Nifty seeing a weak opening on Monday.

Midcaps continued its decline, while banking stocks and pharmaceutical names were trading weak as well.

The Nifty in the first few minutes of trade also breached 9,900-mark, marking a free-fall of sorts from its Friday moves. Having said that, experts such as Ambit Capital believe that it is still too early to call it a beginning of a major correction.

“By the time Q3 arrives, the demonetisation base will make the quarter look good, but the big question is how long will the consumer hang on?” Saurabh Mukherjea of Ambit Capital told CNBC-TV18 in an interview.

He added that the data for consumption in Q2 becomes the key. “If retail and housing finance NPAs are good in the second quarter, then this cannot be a start of a correction,” he told the channel.

The only way to make money in this market is to buy high quality names and sit tight for a long time, he said. “One could selectively look at buying IT, pharmaceuticals and FMCG names, but will stay away from financials,” he told the channel.

The other major problem is the lack of working capital among manufacturers. “There has been a problem of this for the past couple of months. With major input tax credits being ruled out by the government, this is becoming an issue for other sectors,” he said. This, along with government spending under the hammer is a challenge.