Market not in bear run; expect banks to outperform: Kotak Mahindra AMC

India’s equity benchmark indices Nifty50 and Sensex have slipped around 5 percent in the past month. This has investors worried about a possible bear run on the horizon. Nilesh Shah, MD, Kotak Mahindra Asset Management Company, on Thursday, allayed investor fears by stating that this is not the start of a bear market. In fact, he conveyed Street expectations of midcaps and smallcaps being capable of delivering similar growth as largecaps. In the coming months, he expects the FII selling to subside as well. His advice to investors, for now, is to keep some cash in hand.

He said, “I will recommend investors to keep some dry powder. We all know that after war market recovers but we do not know when the war ends and what will be the impact of the war. My recommendation is to follow your asset allocation model. This is still buying on dips and maybe if the situation doesn’t improve in Russia-Ukraine then sell on rising kind of market for some time.”

Elaborating on sectors, he expects the banking sector to outperform, going ahead. He added that recovery in stressed assets for banks will go up and net interest margins (NIMs) will improve too. He shared that steel is seeing pick-up and the private investment cycle is being led by renewables, sugar.

On crude oil, he said that prices are moderating from the highs. “This is not the start of a bear market. Let’s look at oil, we have seen the US approaching Iran and Venezuela for releasing oil. If 6-12 months down the line if that works out and ‘if’ is a big word, but Iran can pump in 2-3 million barrels of additional oil, Venezuela about 3 million barrels of supply – that’s more than what Russia is pumping into the market. With all the sanctions, Russia will be forced to sell their oil and gas and that will ensure that we will have a surplus oil market. This will bring down oil prices,” said Shah.

On gold, he said that prices will outperform fixed income over the next 3-5 years. “Gold did deliver 18 percent plus return in 2020. It delivered a negative return in 2021 of about 4 percent, so you have to take 3-5 year view,” Shah said.

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