Nilesh Shah, managing director, Kotak Mahindra Asset Management says investor sentiment remains strong in the market despite volatility, adding that investors seem more confident than fund managers, as their goal is for the longer term.
Speaking with Business Today TV global editor Udayan Mukherjee, Shah said the market is full of uncertainty, the developments in Ukraine, what happens to oil and how India’s growth trajectory behaves. All these are going to make a material impact on the market, he warned, “don’t jump into the market at one go, there will be a lot of volatility ahead.”
Shah is also of the view that as interest rates are rising, inflation is rising, and earnings growth will slow down. However, a lot of it will depend upon what happens yo the inflation trajectory and interest rates movement globally.
How interest rates move, and how earnings growth will move, will determine whether India will trade at its recent valuation or revert back to the historical average valuation, Shah said.
Looking at the current situation of commodities, which have started correcting and looking at the current situation of Russia and Ukraine, it looks like global growth will slow down, the veteran asset manager said, adding that it will not go to the extent of a recession.
“Banking and financial services look attractive, in the rising interest rate environment, their margin will expand,” Shah said, adding that bad debt problems are behind India, demonstrating that the banking sector should do well.
On the insurance sector, Shah said the real challenge for the sector is valuation. The growth assumption by the market was turning out to be far more aggressive. Now, valuations are corrected. He further said that the health insurance and insurance penetration will be positive for the insurance sector and investors can selectively look at the insurance sector to add to their portfolio.
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