The bulls have taken charge as Sensex crosses 27,000 mark and the Nifty hits 8,000 mark. Experts feel a lot of money has been coming into India related ETFs, which in turn has enhanced interest in midcap and small cap space.
Manish Sonthalia, Motilal Oswal AMC says, “Markets are all about rate of change.” In an interview with CNBC-TV18’s Sonia Shenoy, he says midcaps will outperform for a year and a half. Thereafter, it will be an earnings-led growth that has not been discounted by the market yet.
Against market consensus, consumer space will be the best performing sector for 9-12 months, he adds.
Below is the verbatim transcript of the interview:
Q: More than 27,000 on the Sensex. What is your advice to investors at this juncture?
A: I think the party continues and there is a revival in the economy and we have seen Q1 gross domestic product (GDP) numbers come in at 5.7 percent. So it is a small number, markets and stocks are all about rate of change. The rate of change, the incremental growth seems much more powerful in the midcap and the smallcap space. So obviously, it is the midcap, which is going to outperform for the next maybe one to one and a half years and thereafter it will be earnings led growth, which is not fully yet discounted by the markets. Markets are still building in something like 14-15 percent sort of a growth but if things happen as it is supposed to happen, something like that more than 20 percent sort of an earnings growth then obviously it is going to be an earnings led recovery thereafter and which will be reflected in the indices numbers.
Q: The good part is that we are getting fresh leadership from different sectors everyday. So if yesterday was about autos and banks, today it is about pharmaceuticals and cement but how do you pick and choose at this point, what would your sectoral approach be right now?
A: That is the scary part when everything starts to move up, it looks a bit dicey. So off late, we have seen that anything and everything is starting to move up. I think the visibility about the investment related things is still sometime away. So we talk about the construction companies or the realty or even the capital goods play, it is still 12 months away. Near-term visibility is there in IT, it is there, anything to do with exports particularly to the US is booming.
So the pharmaceuticals of the world or the ITs of the world, even the consumer sectors – my sense is that the consumer space will be the best performing sector for the next nine-twelve months and that is against market consensus because everybody is betting that the staples are not going to do well and valuations are pretty expensive.
But growth is pretty decent and it is going to get reflected in numbers going forward. So I think where there is visibility, we would be more comfortable buying into those names where institutional money can come in big numbers is the oil and gas space etc. So top-down money will find an allocation in those spaces where there is maximum space to buy into those name and then after that, it will be all stock specific and bottom up.