Accumulate quality stocks; overweight on banks, financials, real estate: Gaurav Dua of Sharekhan by BNP Paribas

livemint.com:

Gaurav Dua, Senior VP & Head of Capital Market Strategy at Sharekhan by BNP Paribas believes the second half could be tough for developed economies as the impact of rate hikes starts to reflect on consumer spending, real estate and other key constituents of the economy. In the domestic market, the elections in key states and the run-up to general elections next year could result in some volatility. Markets have touched all-time high levels lately.

But are nowhere close to all-time high valuations. That’s because Nifty has spent almost 20 months in the range of 16,000-18,000 level before breaking out. And in this period, the earnings have grown by 28-30 per cent; thereby resulting in a moderation of valuation multiples.

Nifty is trading at 15-18 per cent cheaper valuations compared to October 2021. Having said this, the second half could be tough for developed economies as the impact of rate hikes starts to reflect on consumer spending, real estate and other key constituents of the economy. Domestically, the elections in key states and the run-up to general elections next year could result in some volatility.

Given the healthy growth in earnings and expected multi-year economic upcycle in India, the volatility for any domestic and global reasons would be an opportunity to accumulate quality stocks at better price points for handsome returns over the next two-to-five years. Autos and financials have come out of a multi-year downturn in the past one year or so. The upcycle is likely to last for the next couple of years backed by an upturn in the Indian economy.