Hunt for opportunities in two-wheeler, PSU banking spaces: IV Subramaniam

In a chat with ET Now, IV Subramaniam, MD & CIO, Quantum Advisors, shares his view on whether domestic equities have started looking cheap after the recent correction.

ET Now: Most experts are of the view that we are not seeing the desired earnings growth. They pointed out that crude, among key factors influencing the domestic market, has been on an upmove. In the short term, there is a big disconnect and a mismatch in valuations. What is your take on the ongoing concerns?

IV Subramaniam: I agree. That (disconnect) has been our call for the last one year.

Right from the time of general elections that took place last year, there has been a huge disconnect between the way the market is behaving (moving higher) and the ground realities.

Whether you look at Q2FY15, Q3 FY15 or the March quarter number, the earnings growth has been pretty tepid. The markets have ignored that trend for many months.
This is where the risk lies.

If we seen a couple of bad months in terms of automobile sales or retail sales numbers, and the earnings do not look very good, then there are good chances of the market correcting.

That said, we expect some recovery in FY16; FY17 may see an even stronger recovery.
Certain scrips including that of two-wheeler companies have already corrected. Some banking stocks have become cheaper, especially the PSU ones.

Hence, there could be some opportunities in these spaces. That said, we still find expensive valuations in other segments, given the tepid earnings growth.