Beyond banking, there are opportunities in select sectors: A Balasubramanian, ABSL AMC

A Balasubramanian, Aditya Birla Sun Life AMC-1200

There is cause for celebrations with a record rally playing out, but where do we go from here? Is it time to partially profit book or continue to hold strong?

Definitely it is good news that one market is touching a new high but reflection of the optimism towards emerging markets and within emerging markets in particular to India, reflects the kind of flows that have been coming from overseas investors who do not want to take a chance on any outcome on the poll results. This can take the market to a completely new level, if there is stability and the incumbent government comes back.

These are the reasons why the flows are coming in and the macros are showing an improvement on currency. Our inflation situation has improved and a path has been drawn for interest rates to be brought down further.

Finally, the balance of payment situation is also getting better. If you look at the overall combination, the macros are getting better except that the micro numbers are not coming up to the mark at this point of time.

The good news was that GST numbers for March is touching an all-time high. On an overall basis, I would assume 2019 could turn out to be a good year from the broader market point of view.

Are we going to see broader participation as well and how much scope is left on the upside? Is there going to be a more sustained uptrend from here?

The whole of last year, the markets were driven by five or six companies and in last quarter, we saw a bit of broad-basing. As we move forward, the significant outperformance in the Nifty Next 50 companies and the smaller midcap companies, which is quite unique in 2018, could probably reverse and we will probably see the broader market participating.

All that would be the function of a), how the earnings will turn out to be and b) all the steps that have been taken both in the budget as well as the interstate, would largely benefit the small and medium enterprises.

We would probably expect these kind of benefits accruing to mid-sized companies and a larger movement coming from companies outside Sensex and Nifty. That will be a true reflection of how the sentiment improves towards investing in equity.

Even within the largecaps, the rally has just about begun to broaden out and you are seeing a sectoral churn. A rally that looked restricted to only ICICI BankNSE -1.27 %, Axis BankNSE -0.77 % and HDFC BankNSE -0.09 % is now spreading across to some of the PSU banking names as well. Where do you find opportunities outside of banking?

The banking rally began on the back of improvement in the bank balance sheet and corporate lending picking up. Wholesale book lending also has begun to move up. As you rightly mentioned, the sectors apart from this being large weight, clearly the OMC-led by the oil price movement again provides a great opportunity.

Second, is the consumer durable space. While one can argue that valuations of these companies are high, but having seen sustainable earnings coming from these companies, it remains one of the potential investment opportunities.

Third, the pharmaceutical space, which has taken a major hit in the last three years. All the negatives are coming into pricing and therefore some of these companies could also potentially be the beneficiaries purely on the basis of balance sheet strength and the business outlook that is emerging.

Even the telecom sector has seen consolidation and maybe an inflection point will reach very soon and that would also bring some kind of traction towards the sector.

Obviously, the banking and finance service sectors will remain the drivers of the index, given the fact that 36% of the weightage is coming from banks, NBFCs and HFCs alone in the overall index. That is where the index is being driven.