Markets will remain volatile and will bottom out in the next one or two quarters, once general elections come closer and spends improve in the overall consumption space, said Vinit Sambre of DSP Mutual Fund in a conversation with CNBC-TV18.
“Demand on the entry-level side, rural side and bottom of the pyramid continues to languish. I think that is now casting some bit of impact on the urban markets as well. Over the next two quarters, the impact of this slowdown will be felt and we should see a recovery push after that,” he said.
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Sharing his sector-specific views, Sambre said that he is currently underweight on IT stock, but the sector’s long-term growth potential remains intact. “We are on the sidelines at the moment, but at better price points we want to accumulate the stocks within the category.”
“I think the large-cap IT stocks have corrected well and there is some bit of bottom formation taking place. If we consider their free cash flow yields, they have reached decent levels,” he added.
Sambre is also investing incremental capital in companies that have made ‘decent investments’ towards capex in the last few years. “While they have invested capex, they have not levered up the balance sheet and that is an important aspect. Some of these companies have also been generating a decent return on equity,” he explained.
Finally, when it comes to cyclical recovery, Sambre is keeping faith on healthcare, agro-based companies, automobile and auto ancillary sectors.
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