Caution Is Still Necessary Due To Persistent Unpredictability: Kotak Mahindra AMC CIO

There are a lot of unpredictable things which are happening around the globe. Therefore, traders have not seen the end of volatility, said Harsha Upadhyaya, chief investment officer, equity, president, Kotak Mahindra Asset Management Co. Caution is going to be necessary as it's not going to be a one-way market. Sectoral moves are not going to be uniform.

Indian markets have two mixed views right now. The first view is that valuations look attractive, and the second is that it's better to be in wait and watch mode. One needs to be very mindful in terms of stock selection for the portfolio. One cannot say that valuations are attractive or cheap; it's a blind buy at this point, Upadhyaya said.

There are many factors impacting Indian markets at present. Unless all of them turnaround or a situation arises where valuation discounts all the negatives, a sharp pull-back is unlikely, he said. The up and down in the markets will continue in the near term.

In the very short-term, markets appeared to be oversold. The external environment is extremely volatile. There are so many policy statements, which have come and gone. More such statements will come. Hence, the outlook has become quite unpredictable, Upadhyaya said.

In isolation, India has been doing quite well in comparison with global markets even today. Conducive global factors add to growth momentum, which is not happening right now, he said.

However, the Indian government has taken the right steps from both the fiscal and monetary sides. The impact of those will be seen in the next couple of quarters, he said.

India will witness gradual growth recovery, he said. Now, what needs to be watched is whether that growth recovery is good enough to take the market back to a bullish zone.

Kotak Mahindra Asset Management Co. has always preferred large-cap stocks. However, there are certain companies that have corrected significantly without a downtrend in earnings, he said.

The asset manager's analysis shows that going forward, earnings of India Inc are expected to rise, which applies to these companies as well. Hence, Kotak Mahindra Asset Management Co. will be thinking of exposing itself to such stocks, he said.

Kotak Mahindra AMC doesn't have sector-specific favourites. Their choice depends solely on valuation. Large banks are the only pocket where an investor can find comfort, he said.