While the benchmark Indian stock market indices are on a sustained rally for some time now, supported by heavy buying from foreign investors who have turned positive since BJP’s landslide victory in the UP state elections, a top fund manager is cautious against aggressive buying into the markets.

“We are not too aggressive at this point, because we are not seeing any runaway in any sector,” Mahesh Patil, Co-CIO, Birla Sun Life AMC, said in an interview to CNBC TV18 on Wednesday.

Earlier today, the BSE Sensex breached 30,000-mark only for the second time ever, and the NSE Nifty hit a lifetime high of 9,264.95 in opening trade on sustained buying by retail investors amid increased foreign fund inflows and positive Asian cues.

Widespread rally

However, Patil pointed out that wider markets have performed much better than the Sensex and Nifty in the recent years. “The breadth of the market has increased considerably, not only now, but in the last 2-3 years,” Patil said, adding, “While the Nifty has done well, the broader indices have done much better in the last 1-3 years.”

“It’s going to be slow recovery in the economy as well as corporate governance. But we have seen good amount of sector rotation happening in the market at this point in time,” he said.

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Investors would do well to buy individual stocks in select sectors that could benefit going ahead, other than the marquee large-cap companies, Patil said. “This year largely it will be a bottom-up stock pickers market, since the larger cap companies will do well but not that much,” he said.

Value increase

Patil suggests keeping a watch on Individual smaller sectors and domestic business focussed companies to buy in on corrections, where the earnings growth outlook could be much better than some of the broader market indices.

“We have identified a few sectors that we have identified from a long-term perspective, such as consumer discretionary, NBFC (non-banking finance companies), metals – which has seen a decent price increase in the last one year,” Patil said, adding, “… in a lot of domestic companies we see deleveraging happening and that’s an opportunity for value increase in those sectors.”

“Any market volatility or correction is an opportunity to add to these positions,” he added.