- Rahul Veera sees market correction as a chance for bottom-up stock picking in broader markets
- Energy crisis pressures manufacturing profits, but market has priced in war impact on India
- Preference given to small private banks due to cheaper valuations and no major NPA cycle
Despite the ongoing turmoil in the Middle East that has put immense pressure on energy prices and has led to FII outflows, Rahul Veera, a fund manager at Nippon India AIF, believes the correction is creating a lucrative opportunity for bottom-up stock picking, particularly within the broader market.
Speaking to NDTV Profit, Veera pointed out that while the energy crisis continues to put pressure on manufacturing profits, the market has priced in these disruptions.
"In terms of valuation correction, it has not happened, but in terms of market correction or time correction, the market has already priced in the current till-date impact of the war on Indian markets," Veera said.
Veera particularly highlighted a shift toward the services sector and high-conviction plays in banking and pharmaceuticals. Drawing parallels to the 2011-2019 cycle, he identified banking as a "clear-cut winner" due to cheaper valuations and the absence of a major NPA cycle.
"It's going to be small private banks, that is going to be our first preference. Since the NPA cycle is not there, the comfort is much higher on these smaller names," he added.
Addressing the recent breach of the 95-per-dollar mark for the rupee, Veera added that currency depreciation would act as a tailwind for exporters.
"Pharma and pharma exporters, again, small-cap and large-cap, both sides, there are lucrative opportunities in the pharma space for sure," he stated. He pointed out that logistical issues have driven up domestic API prices, benefiting smaller players.
While remaining cautious on large-cap retail and energy, Veera emphasised a disciplined, valuation-driven approach.
"Lot of companies are available in a single-digit PE as of now if we have a two-to-three-year kind of a framework. So we continue to allocate incremental capital towards small caps and mid caps from here on," he concluded.
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