The valuation of the Indian market is above average but there are opportunities in some sectors, such as consumption, industrial engineering and capital goods, over the medium to long term, said Nilesh Shah, MD, Kotak AMC in an interview with ET Now.
"We believe there are certain trends where there could be opportunities going ahead not in the short term but over the medium to long term. The first trend which is visible right now is a revival in consumption," said Shah.
"Like consumption has revived at the bottom end, middle end of the society the same thing is happening in an investment where the government was already investing but now private sector large, big as well as small are redrawing capital expenditure plan. Companies which are engaged in industrial engineering and capital goods will be beneficiaries of this CAPEX revival," Shah told ET Now.
Shah is positive about the banking sector but believes that the banking stocks may not give similar returns to the last year because their valuations have risen.
"One year back, bank valuations were very very cheap, FPI had sold aggressively and that had kept the prices low. The banking sector was having single-digit credit growth. Now we have double-digit credit growth. We have FPI selling turning into buying and we have seen bank stocks moving from cheap valuations to reasonable valuations. So going forward banking sector will do well in terms of profitability, and growth but the stock price may not repeat what happened last year," said Shah.
Shah warned to stay cautious about the global cyclical as the global economy is going through a rough phase and will negatively impact the global cyclical sector.
But more than the sector, it is about the management.
Shah said the Indian market is expected to give healthy returns in the long term but it has a low chance of giving a double-digit return over the next one year.
He said investors should follow their asset allocation and not get lured by past performance to invest; rather they should look at the future potential and invest.
Disclaimer: This article is based on an ET Now interview. The views and recommendations given in this article are those of the analyst. These do not represent the views of MintGenie.