V Srivatsa, EVP & fund manager at UTI Mutual Fund, shared his views on the fundamentals of the market and shared outlook on specific stocks and sectors.

Share Market Live

NSE

Speaking about the market sentiment, Srivatsa said, “At the current level, whatever negative news that we have seen or sentiments we have seen in the last six months, either in terms of the macro or even in terms of the corporate earnings, my guess is a lot of it is already priced into the stocks. If you look at the last one year, both the Nifty and the midcap indexes have given negative returns. I think a large part of the pain is behind us. So, we may still have 2-3 months or maybe maximum one or two quarter of pain or negative news flow on the macro and the micro side, but a large part of the pain is already reflected in the stock prices.”

On the valuations, he said, “On an FY20 basis, there has been a kind of a decent cut in the earnings, largely because the pain has been felt in the consumption space. However, going forward if I roll forward to FY21 and expect the demand to rebound, we can have a very healthy earnings growth in FY21 and the markets are probably not pricing in that. So from that perspective, I am quite positive on the market right now.”

“From a valuation perspective, two sectors really standout which I would be looking at. One is the automobile where we have seen a huge amount of price correction over the last 18 months. While the headline valuations even on FY20 or maybe on FY21 may look expensive, but clearly the analysts or the market has not factored in the kind of growth that can happen if there is a revival in the overall demand,” he added.

Srivatsa is also bullish on the metal sector. “While metals have seen a huge amount of slowdown in the last 3-6 months because of prices, but historically if I look at the last 10-15 years, they have clearly bottomed out at a price-to-book of 0.5-0.7 and also when the underlying metal prices are at a 12 month or a 15 month low. So, if you look at FY13, FY16, or even FY09, whenever the metal prices have reached such levels, I think very good returns have been made by investors,” he said.

Disclaimer:

The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.