As Indian markets continue to recalibrate after a great run in recent years, Pramod Gubbi says that a sustained correction could offer opportunities to invest in businesses with long-term growth potential, at more attractive valuations.
Speaking to NDTV Profit, the co-founder of Marcellus Investment Managers expressed optimism about the macroeconomic fundamentals, which he says remain "fairly intact", despite a cyclical slowdown in certain sectors.
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However, he warned that the markets haven't become significantly cheaper yet. "Looking at earnings and long term earnings growth potential, I do think that you'll need a little more margin of safety," he noted.
While sectors like IT and pharmaceuticals have earnings visibility and predictability, Gubbi said they remain relatively expensive. "Given the earnings certainty and predictability, IT and pharma rank higher in our pecking order," he explained.
Among the few pockets of value, Gubbi pointed to private-sector financials, including banks and some NBFCs, as a pocket of value. "It's only over the last decade or so there is conviction building in financial markets and therefore you're seeing the flood of money coming into mutual funds, PMS', AIFs and several other financial assets," he said, reckoning that it is a multi-decadal trend.
Looking ahead, Gubbi urged investors to temper expectations after the extraordinary market performance over the past three to four years. "Be prepared for relatively lower returns in the near term," he advised.
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