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  • Private sector banks could be good bets in coming years: PPFAS

    Mr. Rajeev Thakkar's interview by The Financial Express, July 15, 2016

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    Midcap indices hit their new all-time high this week, but will this rally continue in future?

    Private sector banks could be good bets in coming years: PPFAS
    Midcap indices hit their new all-time high this week, but will this rally continue in future?(Photo: Reuters)

    Midcap indices hit their new all-time high this week, but will this rally continue in future? Rajeev Thakkar, chief investment officer and director, PPFAS Mutual Fund feels multiple expansion may not continue forever and in some cases the multiples could contract also. Thakkar tells Feonline that strong inflows in domestic equity markets supported mid-and-small cap space and one needs to be very selective in buying after the recent run-up.

    Q. Midcap indices hit their record highs in July. Which factors are supporting these indices?

    A. Domestic equity flows have been strong in the past few years. This has been broadly supportive of the mid-and-small cap space. Also in the large cap space, sectors like commodity players, PSU banks etc have been witnessing subdued earnings which have resulted in the relative outperformance of the mid-caps.

    Q. How do you see midcaps going forward?

    A. It is difficult to generalise about all mid caps as there is a lot of diversity in companies. However, broadly with the prices going up quite fast, one has seen multiple expansions apart from just earnings growth. Going forward, the multiple expansion may not continue forever and in some cases the multiples could contract also. Hence one has to be selective and cannot get into midcaps blindly.

    Q. How do you see valuations of benchmark indices after the recent bull-run? Where do you see Sensex and Nifty by March 2017?

    A. Valuations of indices are running somewhat above average. However, this is also to be seen in the context of record low interest rates the world over. While indices are not at the cheapest level, there is also nothing like a bubble. Our approach is stock specific and we do not have index targets.

    Q. On which sectors you are positive after recent rally?

    A Given the trouble that PSU banks are going through and the fact that they still have a lot of market share, we are positive of private sector banks which are expected to gain market share in the coming years.

    Q. What are your expectations from Q1 earning figures? Can we some turnaround this time?

    A. Excluding commodities and financials, we saw decent returns in the last of previous financial year. The same could continue in Q1.

    Q. What is your take on small caps? How do you see them in 2016-17?

    A. The small cap space is similar to the mid-cap space. One will have to be very selective in buying and the broad re-rating in valuations that we have seen cannot continue indefinitely.

    Q. What are the factors which can dampened the party on Dalal Street?

    A. There can be many factors which can come out of nowhere, geo-politics, natural and manmade disasters and so on. However in the long term stock prices are a slave to earnings. As long as the trajectory of businesses is on the right path, one should not worry too much about the short-term fluctuations.

    The original article could be seen here.

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