Growth to come from banking sector; stay away from pharma: Kotak's Sanjeev Prasad

One of the key highlights for the Indian market’s rally so far in this calendar year has been the stellar rise in midcaps. Midcap indices on BSE and NSE have risen between 26 and 28 percent between January 2, 2017 and September 4, 2017. While in the recent consolidation phase, the sector did witness a correction, it was a restricted one.

The rally also brought the debate around valuations and fundamental mismatch (in terms of earnings growth) into sharp focus.

Sanjeev Prasad, Co-Head & Managing Director, Kotak Institutional Equities believes that investors currently being bullish on all aspects and stocks are trading at ‘ridiculous’ valuations.

In fact, one is looking at flat numbers for Nifty. “There is a lot of growth coming from the banking sector and we could see some movement in terms of NPA resolution next year,” Prasad told CNBC-TV18 in an interview.

Speaking on stocks and sectors, Prasad is positive on Indian Oil (IOC) among oil marketing companies and this stance has existed for a long time. “IOC looks reasonably valued at 10 times FY18 earnings,” he told the channel.

He prefers to stay away from pharma and said that the correction is more due to earnings downgrades than the valuation.

Meanwhile, in case of auto stocks, Prasad said that the current valuations are not supportive for two-wheelers. Among four-wheelers, he likes Maruti Suzuki though the stock is expensive right now.