Vetri Subramaniam of UTI AMC feels valuation is a challenge at present but it was a challenge earlier too
The market ended the August series with a nearly 5 percent rally on top of 5 percent upside in previous series, driven by corporate earnings. It surmounted concerns like US-China trade tensions, sharp depreciation in the rupee-dollar, rising crude oil prices and likely monetary tightening.
The Nifty scaled its historic high of 11,760 in the early part of the week followed by consolidation for three consecutive sessions.
The market has had a good run in the last couple of months but the narrow rally means select stocks will lift the market higher, Vetri Subramaniam, Group President and Head-Equity of UTI AMC, told CNBC-TV18.
He said valuation is a challenge at present but it was a challenge earlier too. In March 2015, valuations was around 25 times and now we are up 10 percent year-to-date from March lows.
So, should investors temper down their return expectations? Vetri said it is difficult to predict a fall and rise in the market, adding that the fund house has been reducing equity exposure in multi-asset funds due to valuation concerns.
Among sectors, Vetri is positive on corporate banks as the worst related to non-performing assets is behind it and credit cost should drop significantly going forward.
He is also bullish on the pharmaceutical space as lot of pain related to US drug regulator is already in the numbers. "Keeping in mind companies' aggressive spending on speciality products (about 6-7 percent of total revenue) is likely to improve return on capital. So, bet on select stocks."