It’s time to be cautious on market, Nilesh Shah, managing director (MD) of Kotak Mahindra AMC, said on Monday. Shah also said that it’s better to avoid momentum stocks.

Speaking in an interview with CNBC-TV18, he said, “If we look at the average market cap to gross domestic product (GDP) ratio, the historic average is between 75 and 80 percent. Today, we are trading well above the 110 percent market cap to GDP ratio. So, undoubtedly the market has started discounting the future very positively and the excess of the market is visible in some of the stocks where we believe valuations are way above their fundamentals. So, this is the time to be cautious.”

“It’s time to go back to fundamentals rather than momentum, and in our portfolio, we have been moving towards larger companies and companies which are leaders in their respective sectors,” said Shah.

On sectors, he said, “We have been overweight on the home improvement sector, where we believe there is an opening up of economic trade. As vaccination allows the opening up of the economy, the first expenditure will be towards home improvement. So, we are overweight on cement, to plywood, tiles, and home finance companies, to other materials in the space.”

For the entire interview, watch the video.

(Edited by : Dipika Ghosh)