“Consolidation for a year is, I think, a fair — it’s a possible outcome,” Kumar said in an interview with CNBC-TV18. He added that, despite the pressure on the Nifty in the near term, valuations at current levels were reasonable for investors looking at a longer-term horizon.
“So in that sense, I think it may not be a bad entry point for somebody looking at markets,” he said.
Kumar said the market is being weighed down by three factors — higher crude prices, rising US yields and a strengthening dollar. He said the latest week had also marked the first genuine reduction in risk appetite after months of relatively healthy participation across different parts of the market.
Crude, US yields and dollar weigh on markets
Kumar said crude had been the biggest market mover over the past few weeks, with prices not only moving higher but also sustaining at elevated levels. He said this was different from previous episodes when crude prices were more volatile.
US yields have also moved higher, with Kumar noting their correlation with Brent, while the dollar index has continued to strengthen.
“I think all three things together have been kind of a drag on not just emerging markets, but equity markets in general,” he said.
Risk appetite shows first signs of weakening
Kumar said the market had remained broadly sideways over the past couple of months, while mid- and small-caps, various sectors and activity in both the IPO and secondary markets had indicated healthy risk appetite.
That changed in the latest week, with Kumar describing it as the first time there had been a genuine reduction in risk appetite.
Banks in portfolio, insurance stocks out
Bandhan AMC’s quantitative strategies have decent exposure to banks across both the large-cap and mid-cap segments, Kumar said.
The AMC has stayed away from insurance companies, citing uncertainty around regulations and earnings visibility. He said the fund house would continue to remain away from the segment for some time.
Capital-market plays remain a secular theme
Kumar said capital markets are among the secular themes in Bandhan AMC’s investment universe and that the main names in the space could benefit from increasing penetration.
“We continue to remain bullish on them,” he said.
However, Kumar noted that capital-market plays also move through cycles. While the longer-term trend remains positive, he said the fund house would need to monitor those cycles.
Selective approach to IPOs and UPI-linked stocks
Kumar described the IPO market as a mixed bag and said Bandhan AMC remains selective about participating in offerings. The fund house conducts its own analysis before taking part in IPOs, he said.
On stocks linked to UPI and MDR, Kumar said the AMC has exposure to some of these names and continues to play the theme selectively.
He said there had been anticipation around the regulatory change, so the announcement did not come as a surprise. The stocks have since been consolidating, while the broader weakness in market sentiment has also weighed on them.