Naveen Kulkarni, head of research at Reliance Securities, in an interview with CNBCTV18.com, talks about market valuations, ongoing earnings season and market expectations from the 2019 Lok Sabha elections. He expects Nifty to touch 12,500 in case of a BJP win. Edited Excerpts:

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Which factors have made the market cautious despite factoring in a stable government?

Markets are factoring a stable government but macro challenges are emerging. Crude has seen a strong rally and has again started posing challenges. The NBFC (non-bank financial company) space is also seeing challenges with the cost of funds rising. So, a multitude of factors is resulting in higher market volatility. Thus, investors remain cautious.

Are you comfortable with the market valuations at current levels?

The Nifty 50 index is trading at 18 times one year forward earnings which is one standard deviation above the long-term mean. So, market valuations are not cheap, however, market valuations are not at exuberant levels either.

With the earnings season ongoing, which sectors would you avoid and bet on?

Cement sector is showing good pricing traction as the volume growth has been pretty strong for the sector. So, cement looks at a very interesting juncture. Meanwhile, we will avoid automobiles and metal sectors.

What are the factors affecting the rupee market currently?

Crude prices and FPI flows are key factors impacting the rupee. If FPI flows were to slow down and crude prices remain firm, the rupee is likely to weaken further.

What themes would come in play after the elections?

Infrastructure will be a clear theme to play after elections.

With markets factoring in a clear BJP win, what is your Nifty target in that scenario?

Our Nifty50 index target post-BJP win will move up to 12,500 from current 12,000 levels for December 2019.

Which aviation stock would you bet on now that Jet crisis continues to worsen?

Airline stocks present an interesting investment case. The surviving players are likely to see significant improvement in cash flows and pricing power. Interglobe Aviation will be a good stock to invest in.

First Published:May 6, 2019 12:23 PM IST