Banks To Real Estate: Here's Vikas Khemani's Strategy In A Likely 'Stock Pickers' Market
Investors need to keep looking for value and growth in the information technology space, he says.
Amid an erosion in the markets and several pockets seeing sharp corrections, investors should keep low expectations this year as it is expected to be a stock pickers' market, according to Vikas Khemani, founder of Carnelian Asset Advisors.
There has been a slowdown in earnings that has brought a squeeze in the liquidity as well, said Khemani, who expects a pickup in the markets in the second half of the year. He anticipates more time correction over value correction in the next couple of months.
"The small and mid caps have corrected more than broader markets. This is a good and healthy consolidation," he told NDTV Profit. "I believe 80–90% of the damage is done and don't see major downside from here."
As various sectors stand at different junctures, here is Khemani's take on banking, information technology, real estate and consumption.
Consumption: Constant Changes
Among the sectors that Khemani perceives as limited due to the constant changes is the consumption sector.
"Consumption is a long-term story. The valuation is high in the sector, so one has to pick. There is always newer competition and changing consumer behaviour," he said.
Due to this reason, Khemani said the consumption stocks on their portfolio are limited. They only hold a few that they are confident about.
Though these stocks may not fall as much, the returns remain limited, he added.
IT: Second-Tier Firms To Grow Faster
The IT sector is also seeing a churn as various trends and resources are being tapped into by companies. According to the speed at which companies adapt tech, the growth is spread differently across various sizes of companies.
"Smaller companies have tapped into value creation. As AI comes in, smaller companies will be far more nimble as they move in faster. We will see a trend where second-tier companies will grow faster," he said.
As both growth and potential is spread unevenly through companies, investors need to keep looking for value and growth in the space, according to Khemani.
Banking: Set To Outperform
"Banking is good for value. The sector is supported by the RBI and government spending. This year, earnings have been soft, but we think it will outperform," he said.
With dull earnings so far, there could be a possible reversal in trend in this sector as there are a few external support factors.
Real Estate: Don't Expect Past Returns
The real estate sector has delivered solid returns in the past and Khemani calls it a structurally good sector.
"There is more consumer protection, it's more organised. Good returns have been made but how much companies are able to deliver in the future, we can't tell," he said.
Hinting that the good run in the past does not guarantee returns in the future, Khemani said that sales in the future might not go in the same trajectory.
"You can make profits with existing land but new sales may be different. Don't expect the returns of the past in the next three–five years," he added.
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