Sonthalia believes that short-covering activity will drive the market higher.
The NSE Nifty fell to 9,980 in March and has shown rebound since. The 50-share index is now trading around 10,600 levels, ushering hopes it could touch the 11,000-mark soon. But is this rally here to sustain?
Manish Sonthalia, Head Equities— PMS, Motilal Oswal AMC, believes short-covering will drive the markets higher. “The initial trends from corporate earnings look decent. It remains to be seen how the rest of them perform going forward.”
In an interview to CNBC-TV18, he said the market could hit new highs in the current fiscal.
On domestic flows, Sonthalia said the rupee needs to stabilise for FIIs flows to be steady. “Inflows have reduced as compared to January and February. Investors are probably worried about sustainability of valuations. What you need is earnings growth and if that comes in, confidence would rise too.”
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Among sectors, he likes private banks and export-related themes like IT on the back of a weak rupee. “The deal flow pipeline in digital is also good for the IT space, which will have a bearing on most IT names,” he added.
When asked to choose between corporate lenders and private banks, he prefers the latter as “corporate lenders are still a lot of work in progress.”
Sonthalia likes rural focussed consumer staples and real estate. “These will be the themes that play well in an inflationary environment. Those with an emphasis on the rural space are on our radar.”
In the pharmaceutical segment, he seeks comfort in domestic names as these see no shocks and warning letters on the regulatory front. “There is value on the table in case of this sector.”