Tata Mutual Fund: Going to be year of cyclicals; uptick in realty activity benefits many sectors

On valuation, he said, “It's a good thing that this adjustment in valuations and adjustment in interest rates is happening in a year when we are seeing a significant broad based recovery in profitability for the corporate sector. Here I am talking about the Indian corporate sector more than anything else, because we are seeing multiple sectors really firing and contributing to that profit forecast - every year, we used to start with 20 percent ends to get downgraded to 5-7 percent or even flat. This has been one of those few years where we are seeing earnings estimates sustaining and even seeing marginal upgrades in some cases. So it's a good year to be going through that adjustment on the interest rates and valuations in my view.”

The fast moving consumer goods sector (FMCG) will see gross margin pressure and the sector could see very stock specific action.

“It will become very stock specific and very selective from hereon for that sector,” he said.

On metals on non-ferrous side, the demand is structural, he said.

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Speaking about corporate sector profit growth, Singh said, “This is a good year to be going through the adjustment. This was a pending adjustment in the interest rates and therefore the equity valuations. It is good that it is happening at a time - at least from Indian market perspective - when the corporate sector profit growth is broad-based and corporate sector profit growth is sustaining, the estimates are sustaining by and large. So there are no major disappointments on profit growth on an aggregate basis. At an individual or a sectoral company level there are disappointments.”