Harsha Upadhyaya's stock picks: 2019 will not just be about consumption, but infra too

Harsha Upadhyaya, CIO-Equity, Kotak AMC, shares his market outlook for the coming year and lists out stocks and sectors he would be looking at in 2019. Excerpts from an interview with ETNOW. Edited excerpts:

ET Now: Given how the global markets have performed, do you think that India would continue its show of resilience because of the cool off in crude? Or do you think there is a fair chance that we may actually fall prey to their weakness?

Harsha Upadhyaya: Crude oil prices have fallen 40 per cent from their peak which is a significant positive for India. Our economy as well as our corporate profitability will start looking up based on the fall that we have seen in crude and other commodities.

Once we get clarity on the political scenario,it is likely that our markets can significantly outperform other global markets because the fall in commodity prices is a significant positive. And if this situation remains favourable for the next six months, we should be able to really outperform other markets.


ET Now: Are you of the view that the worst may be yet to come?

Harsha Upadhyaya: In the very short term usually liquidity and sentiments drive markets rather than fundamentals. While from a fundamental basis we are positive that Indian economy as well as corporate profitability will start to look up, but in the very short term we would be driven by a lot of sentiments and liquidity scenario which is not looking too bright.

So, that is why it is likely that the markets can remain volatile in the short term. Also, locally we have a political event coming up in the next few months, so to that extent we may remain sideways at best and more volatile.

ET Now: There has been some data floating around in the market believes the correlation with an election event is not as much as one anticipates it to be. Historically, markets on a financial year basis and on a calendar year basis in the year of the election have actually done quite well. What is your take on it?

Harsha Upadhyaya: I am not saying that elections will make a huge impact on a three-year or a five-year return, but in the next few months I think the noise is going to increase in terms of what political scenario is going to develop.

To that extent I do not think India will outperform other markets given this particular event.

Once we get past the elections, people will start looking more towards fundamental strength that is there in our economy and we believe that financial year 2020 will be a year of earnings recovery. We are expecting about 20 per cent plus earnings growth for our market. Give the earnings growth as well as clarity on the political scenario, our markets will then start to outperform other global markets.

ET Now: What is your portfolio strategy in the first six months versus post elections?

Harsha Upadhyaya: Firstly, the entire 2018 was more driven by consumption led stocks and almost all of the consumption led stocks have performed very well. The valuations have become rich and we are also seeing at the margin some tapering of growth in consumption led segments. We remain a bit cautious on consumption stocks going into 2019. We believe that the valuations are not in our favour and hence we need to be cautious on that segment.

Secondly, we believe the mid and small caps which have corrected sharply from the peak levels of January 2018 and have started to look attractive. I am not saying the entire basket looks lucrative but at least on a stock specific basis there will be many midcaps and smallcaps which will grab our attention from here on and that is where we are building our position.

Overall, portfolio for 2019 should be a balance between consumption and infrastructure stocks. This is unlike 2018, where only the consumption sector found favour. In terms of multicap strategies, we are looking at adding select midcaps and small caps going forward.