“I think if you get a Nifty close to about 25,000 I may view it as a place to probably exit some positions,” Arora said in an interview with CNBC-TV18.
He warned against getting carried away by the recent market rebound. Although global sentiment has improved and technology stocks have recovered sharply, he said it is too early to call this the beginning of a new bull run. Corporate earnings for the June quarter will offer a clearer picture of how businesses are coping with higher oil prices, freight costs and demand conditions in key markets such as the US.
Another key risk is interest rates. According to Arora, there is still no consensus on whether the Reserve Bank of India will keep rates unchanged until October or raise them as early as August. “One thing that is a big uncertain… at this point is how interest rates in India will move,” he said.
Arora is also watching the monsoon closely. After signs of a rural recovery in recent months, a weak start to the rainy season could hurt farm incomes and consumer spending in rural India. He noted that some retailers with a strong presence in states such as Uttar Pradesh and Bihar are already expressing concerns about Britannia Industries
.
On the consumer sector, Arora believes investors should be selective. While many market participants expect consumer staples to outperform discretionary companies, he argues that valuations remain expensive. Most large staples companies are trading at 45-50 times earnings despite relatively modest volume growth.
Instead, he prefers food-focused consumer companies. His top picks in the staples space are Tata Consumer Products, Nestle India and Eternal, where he sees better prospects for profit growth and margin expansion.
Watch the full conversation here
In the new-age technology space, Arora favours Swiggy (Zomato) over One 97 Communications. He believes the company benefits from strong food delivery growth and comparatively lower losses in its quick-commerce business. “I think you could probably make 25-30% on Eternal,” he said.
However, he added that the next big trigger for internet companies will be profitability rather than growth alone. If companies can reduce losses and improve cash flows, they could see a re-rating similar to what One 97 Communications (Paytm) experienced when it shifted focus towards profitability.
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