Do markets look cheap or expensive from a valuation point of view
Markets are looking expensive. Valuations have to be looked in terms of macro-economic fundamentals, which dont justify the fact that markets are trading at 15x. The macro-economic fundamentals look weaker and there is a further scope of deterioration. From here, markets can correct. So, fair value would be around 13.3x or 13.5x. Going ahead, earnings growth will be muted. In FY14, we expect growth to remain flat and expect it to marginally pick up in FY15.
Which stocks are you looking at Are you looking at mid- and small-caps
The pain in the stock markets will continue. But, sectors that are export-oriented would do relatively better. Although, in near-term, they would correct because of the run-up they have enjoyed so far. So, IT may not be a great bet, but pharma at current levels looks interesting. As far as mid- and small-cap space is concerned, this is not the right time to look at these stocks.
What is your near-term and long-term perspective, keeping RBIs monetary and Fed policy in mind
Fed would taper its bond-buying programme sooner or later. It is a certainty which would have serious implications for current-account deficit of countries and their currencies.
In last one year, which sectors in your portfolio have been top-performers What sectors you have gradually exited
IT stocks have been top-performer for us. We exited our positions in the banking sector, which we had accumulated at the bottom. But, even within IT, we have pared our positions since our fair-value assumptions are lower. Pharma is one sector where we continue to maintain our positions.
When do you see the investment cycle picking up What would be the immediate triggers for the market
The investment cycle is currently depressed and would improve with improvement in demand environment, improvement in corporate and banking sector leverage and with improvement in profitability of corporate sector. All this would take time to materialise. A stable government will instill confidence and spur the investment cycle. The immediate trigger is Fed policy and how RBI reacts to it. Medium-term trigger is the election.
What is your year-end target for BSE Sensex
Our year-end target for BSE Sensex is 18,500