Speaking to ET Now, Aniruddha Naha from PGIM India Asset Management said the current phase is throwing up favourable entry points for long-term investors, especially where price corrections are being matched by improving fundamentals.
“What we clearly see is that there are pockets where price correction is clearly giving us an opportunity to start building portfolios. Not only that, along with the price correction in some segments across the market, you have actually seen earnings starting to get better,” he said.
According to Naha, this combination of lower prices and improving earnings creates a “double positive” for investors willing to take a six- to twelve-month view. While the ongoing quarter may act as a base period with certain pressures impacting businesses across sectors, he expects those effects to get absorbed progressively.
“Once that gets built in incrementally into the next financial year, you would hopefully see lower raw material costs coming through as well as growth on the topline. We remain reasonably positive and would recommend building positions over the next six months,” he added.
Autos, Commodities and Discretionary Consumption in Focus
When it comes to sectoral preferences, Naha pointed to automobiles and auto ancillaries as areas of interest, reiterating views discussed earlier. Chemicals and agrochemicals are also on the radar, aided by early signs of improvement from China, which could support the broader commodity cycle.
“Clearly, there seem to be some positives coming out of China, and that would benefit the commodity end of the markets. Commodities and metals would be another segment where valuations are definitely on your side,” he said.
Another theme gaining traction is discretionary consumption, particularly with an eye on the next pay commission revision.
“Discretionary consumption is something we believe could benefit as the next pay commission revision comes through next year, which should be reasonably helpful in driving demand,” Naha noted.
PSU Banks: Stability, Growth and Valuation Comfort
Public sector banks have also returned to the spotlight as earnings begin to trickle in, with improving asset quality trends and steady credit costs supporting profitability. While stock-specific commentary was avoided, the broader PSU banking pack was seen as relatively well-positioned.
“Rather than taking price targets, what we feel is that over the next three to four quarters, you are unlikely to see anything detrimental to the sector,” Naha said.
He highlighted that a lower base could make growth appear stronger in the near term, while asset quality risks, if any, are more likely to emerge further down the line.
“In a market where a lot of sectors are finding it difficult, this is one sector where you have valuations on your side, comfort on asset quality and visible growth,” he said, adding that potential equity dilution remains the key variable to monitor.
Quick Commerce Faces a Reality Check
On the recent developments around quick commerce and reports of scaling back in ultra-fast delivery models, Naha struck a cautious note, saying valuations will need to be reassessed.
“We have been looking at these businesses more from a cash flow perspective, and the 10-minute delivery did add a lot of valuation to these businesses. We will have to wait and see where valuations stack up and what has already been built into these names,” he said.
From an analytical standpoint, he acknowledged that the shift could be negative for some players, particularly if it leads to underutilised infrastructure and lower returns on assets.
“From a valuation perspective, value was being ascribed to the fact that 10-minute delivery allowed you to churn assets more efficiently. As that comes off, it would have an impact on ROEs. We will have to wait and see what kind of impact it has on cash flows, but it is definitely a negative surprise for the industry,” Naha said.