Neelkanth Mishra lists key investment themes for next 12-18 months

"Themes like defence, electronics, and financials are going to be the areas of interest for us for next 12-18 months,” said Neelkanth Mishra, Chief Economist, Axis Bank, Head-Global Research, Axis Capital in an interview to CNBC-TV18.

Mishra expects investors to remain cautious ahead of elections. However, investments will be back post-elections.

For the market, the earnings momentum and near-term valuations should play a much more important role and he believes that the Indian economy will continue to outperform the global setup.

Therefore the domestic cyclicals – companies that are more focused on the domestic economies – are likely to do well, he stated.

Sharing his views on banking sector, he said, “Banking sector as a whole seems to be oversold.” This, he said, was largely because of worries over excessive tightening of liquidity conditions. "But at some point, I think given that the credit demand is strong, and the bank as some pricing discipline sets in, I think some of the concerns that have plagued the sector should disappear."

He also shared his views on capital expenditure (capex) increase in sectors like railways, urban housing infrastructure, roads is in single digits. Over the last couple of years, the government has done the heavy lifting in terms of spending, and “I think that the government’s withdrawal of support is an attempt to calibrate its own presence in the economy given that the debt to gross domestic product (GDP) levels are higher than comfort levels.”

Mishra expects the industrial sector to be driven primarily by the private sector capex and pickup in construction, both in residential and commercial spaces, over the next three years.