Parekh said the Indian market is facing pressure from multiple factors, including Brent crude, rising US 10-year yields, a large supply of equity and the recent insurance sector regulatory proposals.
However, he pointed to relatively healthy household, corporate and banking balance sheets as a reason to remain constructive over the longer term.
“I think a lot of it is now in the price. It’s a little overdone, and we will see a bottom soon,” Parekh said.
He expects second-quarter earnings to be an important trigger for the market. According to Parekh, the first quarter saw Nifty earnings growth of around 17-18%, while mid- and smallcap companies performed better. He expects the earnings trajectory in the second quarter to remain healthy.
Crude oil prices will also remain critical, as sustained high prices could put pressure on corporate and government balance sheets. A moderation in crude, along with a stabilisation in US yields, could provide relief to the market, he said.
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The firm plans to continue focusing on market leaders across sectors, particularly companies with strong balance sheets that were bought at reasonable valuations.
The portfolio includes names such as Maruti Suzuki, Mahindra & Mahindra, Reliance Industries, Eternal, Lenskart, Sun Pharma, large private banks, Bajaj Finance, Shriram Finance, Bharti Airtel and Adani Ports.
Some metal companies have also provided a hedge against global geopolitical risks as higher commodity prices have supported their performance.
The portfolio strategy will continue to rely on bottom-up stock selection, with a focus on largecap companies. The firm currently holds around 18 largecap stocks within the Nifty universe.
In the mid- and smallcap segments, the approach will remain more selective, with greater emphasis on valuation and a higher margin of safety.
The fund manager also disclosed that Sohum Asset Managers bought NSE shares during the pre-open session on its listing day. While he expects some near-term pressure on cash-market turnover, he sees the exchange as a structurally strong business over a five-to-10-year period.
He estimates NSE could deliver 12-15% long-term growth, supported by its asset-light business model and strong cash generation.
Disclosure: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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