Mutual Funds

Worried about election-led volatility? Kotak MF’s Nilesh Shah picks the right sectors to play

Political uncertainty may be the market’s top concern, but it is largely short-term as long-term trends will be driven by earnings, believes Nilesh Shah, MD, Kotak Mahindra Asset Management Company. “The market needs a stable government and as long as that exists, the market will be fine,” he said in an interview to CNBC-TV18.

For 2018, he expects the markets to stay volatile due to rising oil prices, which, in turn, will affect the current account deficit (CAD). “Also, political uncertainty could impact the fiscal deficit.”

Having said that, he was quick to point out that the market downside is limited. Explaining his rationale, he cites: “The consumption story is playing out well and the overall economy is growing well too. GST collections have crossed Rs 1 lakh crore and the monsoon is expected to be normal.”

Adding to his analysis on consumption trends, he highlighted how urban and rural consumption remains robust. “For instance, same store sales growth of food chains or box office collections of some movies have been healthy. In the rural space, tractor sales have shown strong momentum.”

So, what should investors do from a 12-month perspective? Shah recommends looking for opportunities in agricultural, rural and infrastructure space. “These are segments where market outperformance could be seen. One should also look at companies or stocks which are currently challenging the existing business model.”

Among sectors, he expects pain to continue in corporate-facing lenders, especially those who lend to the power sector. While there has been an improvement in merchant power prices, several projects are yet to be recognised as non-performing assets, he added.

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