Smart money is moving towards banks, IT; PSU banks an attractive bet

While one may pick up all weather stocks mainly from the large-cap space, one needs to carefully choose stocks from across the rest of the market cap after considering various other relevant factors.

The PSU banking space has become more inviting with efforts at further capitalisation, recognition of NPAs and mergers and consolidation, Joseph Thomas, Head-Research, Emkay Wealth Management, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpt:

Q) What are the factors that are driving the rally in the Indian market? Are we staring at a record high ahead of elections?

A) The equity markets have been witnessing a kind of pre-election rally, mainly supported by the expectations of a stable government after the elections.

It may also be added that when major global markets moved up about indices back the Indian indices actually moved down, and the market is currently trying to catch-up with global markets through this uptick.

The other factors that are helping the market are stable rupee, smooth liquidity condition in the domestic money market and expectations of further interest rate action by the RBI.

We need to see how far this momentum is sustained and it is only natural that some profit booking can come in especially due to the fact that we are racing towards the financial year-end.

Q) Recent MF data suggests some sluggishness in equity inflows. Do you think the trend will reverse in the upcoming months?

A) The trends visible in the MF equity flows are most likely a temporary phenomenon. The mutual fund inflows are quite consistent most of the time mainly because of the fact that money flows in through the SIP route.

There may be some temporary setbacks here but the long-term inflows of retail money will gradually pick up as we pass by this phase in the markets.

More than liquidity, it will be people’s perceptions about future performance that would drive retail investors’ approach towards fresh investments in the markets.

Q) Sensex has rallied in March. And just a month ago there were global growth concerns, geopolitical issues. Can we call this euphoria ahead of elections?

A) We may see a higher level of volatility as we approach the elections and also around that time. I would not like to call it euphoria but something that is characteristic of markets everywhere.

Q) What is your call on the PSU banking space?

A) The PSU banking space has become more inviting now with efforts at further capitalisation, and also recognition of NPAs and also with mergers and consolidation.

We may see the segment doing better. The faster credit growth and improvement in liquidity conditions, and the change in the stance of the RBI’s policy have all helped the banks to rediscover their business moorings better.

Q) Where is the smart money moving?

A) We have seen buying coming into all major segments and sectors. So it has been more broad-based and not limited to one or two sectors, though it is more evident in sectors like banking and IT.

Q) What is your call on rupee? Any particular stocks or sectors which are likely to benefit the most?

A) The rupee has become stronger, testing the 68.60 levels mainly due to the huge inflows that we have seen from FIIs into the equity markets in the last couple of months. This is also facilitated by year-end repatriations by corporates and exporters.

But, with the announced swap by the RBI and the inflows not necessarily getting much stronger and inherent weakness in trade, would lead to the Rupee going back to Rs.69.60–70.30 levels soon.

A weak rupee helps exporters irrespective of which sector they are into as they get a currency gain in addition to the normal business gain.

Q) Recently real estate stocks have been getting much attention. What is making investors so bullish in this space?

A) Real estate market is yet to pick up in the major towns and cities after the fall that we have seen in the last two years, and in the metros, the inventories are too large that it may take another couple of years to clear the same.

It is also a fact that the prices are still quite steep in some pockets that it is outside the reach of most middle-class people. So any convincing turn around may take some more time.

Q) Top quality stocks have started touching 52-week highs. Does it make sense for investors to stay with stocks which are hitting highs rather than hunting for values in beaten-down names?

A) Stocks may be acquired either for the value that they may provide or for the growth they can bring in, and equity investing is for the longer term and not for the short term.

While one may pick up all weather stocks mainly from the large-cap space, one needs to carefully choose stocks from across the rest of the market cap after considering various other relevant factors.

It is also important to understand that some of the stocks that have run up too much maybe at profit booking levels while some others could be accumulated further. This differs from stock to stock.

Disclaimer: The views and investment tips expressed by investment expert on are his own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.