Investors should stay away from the companies with high debt and high promoter share pledge.
Buying will sustain in quality mid and small-cap stocks. However, investors have to be careful in stock selection as it is very easy to get carried away when the momentum is so strong, Jagannadham Thunuguntla, Senior VP and Head of Research (Wealth), Centrum Broking said in an interview to Moneycontrol's Sunil Shankar Matkar.
Edited excerpts:
Q: In the light of the ongoing rally, what is your view on market and outlook in medium term?
A: The Indian market has made a strong comeback with vengeance starting February 2019 as border tensions have cooled off and valuations have been very reasonable especially in mid and small-cap segments. In March, 2019, till date, Nifty is the best performer globally.
We believe buying will sustain in quality mid and small-cap stocks. However, investors have to be careful in stock selection as it is very easy to get carried away when the momentum is so strong. Investors should stay away from the companies with high debt and high promoter share pledge.
Q: Do you expect the current rally in mid and smallcap to continue for next couple of years?
A: In March’19 till date, the institutional activity has presented a very contrasting picture wherein FIIs have displayed relentless aggressive buying spree, whereas DIIs have been constant sellers. This is quite different in comparison to their activity during 2017-18 wherein FIIs were muted participants and DIIs were aggressive buyers.
If political stability continues and economy revives, the current rally can be expected to sustain.
Q: Do you expect the rally in the banking sector to continue?
A: Select banks can show strong performance that have the ability to take advantage of the current weakness in NBFCs and can sustain asset quality. However, investors should concentrate on those companies that have the track record of maintaining healthy asset quality.
Q: What are the chances that Nifty could hit 13,000 in 2019?
A: Year 2018 was lukewarm for the equity markets due to various reasons, including LTCG taxation, IL&FS default, weak rupee and high oil prices. However, market can have strong year in 2019 if there is political stability, benign crude oil prices and no geopolitical tensions. Further, for the market to sustain, revival in economy and earnings is very critical.
Q: After less-than-expected FY19 earnings, do you expect double-digit earnings growth for FY20 and FY21?
A: The earnings revival in India has been long awaited phenomenon for the past 4-5 years. We believe going forward earnings may pick up on the back of asset quality revival in the banking industry and earnings improvement in non-BFSI on the back of stable oil prices and currency.
Q: What are your top multibagger ideas?
A: Maruti Suzuki, Kansai Nerolac, Pidilite Industries, ITC, Nestle India, Page Industries, HDFC Life Insurance, RBL Bank, L&T and Tech Mahindra are evergreen stocks.
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