Expert view: Market sentiment remains positive but move ahead with caution, says Kotak Mahindra AMC fund manager | Stock Market News

Expert view: Harish Bihani, a fund manager at Kotak Mahindra AMC, finds the overall market sentiment positive. However, he advises moving forward but with caution. He highlights the recent market correction, which has removed froth from many parts of the market. In an interview with Mint, Bihani discussed his investment strategy for the current market and sectors he finds attractive at this juncture.

Edited excerpts:

Should we hope for a year-end Santa Claus rally? What are the key challenges that may keep the domestic market under pressure?

The Q2FY25 earnings season has been one of the weakest in recent quarters, with both topline and earnings growth under notable pressure across sectors.

However, there is a silver lining.

The slowdown in spending appears transitory, with a high likelihood of improvement in the second half of the financial year 2025 (H2FY25) as both capital expenditure and consumption are expected to pick up.

The recent market correction has removed froth from many parts of the market, and the exuberant behaviour of market participants has also tempered post-recent corrections.

Overall, the market sentiment remains positive. Given the expected uptick, it is advised to move forward but with caution.

What is your medium-term outlook for the market? What are the key triggers that will move the market?

We are in the midst of an uptick in the business cycle, with a decent growth outlook for the next couple of years.

The net debt-to-equity ratio is at its lowest in years across market capitalisations, and NPAs across banks are quite low, supporting the upcycle.

The increasing capex cycle across public and private sectors and the revival of real estate demand post-Covid are positive indicators.

Additionally, the rise in friend-shoring by multinational companies adds to the optimistic medium-term outlook for the market.

What should be our investment strategy for equities?

When it comes to investing in equities, simplicity and patience are key.

The strategy should focus on diversification across various sectors to minimize risk, maintain a long-term perspective to benefit from overall business growth and prioritise high-quality companies with strong fundamentals.

Regularly investing a fixed amount, regardless of market conditions, helps mitigate volatility.

Staying informed without overreacting to short-term market movements is crucial, as is understanding your risk tolerance and balancing your portfolio accordingly.

By adhering to these principles, one should be able to achieve his long-term goals.

Which sectors look attractive to you at this point?

We focus on themes and sectors that should perform well over the next three to five years, with steady earnings growth and reasonable valuations.

These include the hospital and diagnostic sectors, auto and auto ancillary sectors, telecom names, niche leaders in the manufacturing space, select consumer names and the building materials sector as second-order beneficiaries of the real estate revival.

From rate cuts to Trump’s return, how do you see these scenarios impacting the Indian IT sector?

The Indian IT sector has shown resilience and will likely continue adapting to changing global dynamics.

With the potential for resilient US demand and the rise of AI technologies, the sector is well-positioned for future growth.

Companies are investing heavily in AI services, opening new opportunities and driving innovation.

As macroeconomic challenges lessen, the sector is anticipated to rebound, supported by strong order books and deals.

Do we have valuation comfort in mid and small-cap segments after the recent correction?

The mid and small-cap universe is vast, with almost 500 stocks under our consideration.

Despite general concerns about valuations, there are viable mid and small-cap ideas with high growth and high return on capital.

The current business cycle provides opportunities to identify and invest in promising stocks, even though higher valuations have made our work more challenging.

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Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.