Institutional investors are giving more preference to earnings visibility than valuations: Hemindra Hazari

In a chat with ET Now, market expert Hemindra Hazari shares his view on stocks such as Page Industries, MRF and Bosch where there are valuation concerns.

ET Now: On every forum, we have endlessly discussed that if you buy into a Page Industries or a Bosch or for that matter MRF, the valuation comfort is not on your side. These are large stocks and retail investors alone cannot drive them. Institutional investors who understand markets and valuations are buying these stocks. I wonder why institutional investors buying these stocks?

Hemindra Hazari: What we have seen in the recent past is that institutional investors are giving preference to earnings visibility. They are giving second preference to valuations. This is due to the fact there is so much uncertainty about the quality of earnings amid the economic slowdown.

They are giving preference to the companies that can meet analysts expectations and that is why we have seen so many downgrades.

The institutional category is willing to pay much more to these stocks. As I said, valuation is the second preference for them. That is why we have seen FMCG and pharma names commanding higher valuations. Institutional investors are confident that at least the earnings will come through. In the other sectors, you are not at all confident about that.