Money is flowing to early cyclical plays like capital good: Prashasta Seth

In a chat with ET Now, Prashasta Seth, Senior Fund Manager, IIFL Wealth, shares his views on capital good space. Excerpts:

ET Now: We have not seen banks participate on Thursday’s session. Is this a telling sign of how things may be going forward with rates going up?

Prashasta Seth: People are differentiating between early cyclical recovery in stocks like capital goods and autos, and banks which could be a mid-cycle or late-cycle recovery play. A part of the money is moving from mid-cycle plays like banks to early-cycle plays like capital good space.

Hence, it is clear that interest rates are going to be high. Even that 10-year Gsec is showing a 25 bps increase in terms of rates. However, I also see some amount of movement from banks to a capital good space.

ET Now: Is the focus currently on cap goods or engineering companies?

Prashasta Seth: That is the play which is more directly related to economy, where you can essentially play the economy theme. At the end of day, if you look at global cyclicals like steel and metals, they are more dependent on what happens globally rather than what is happening in India.

Hence, if one has to take a direct play on what is going to happen in India, capital good space is essentially that space.

Infrastructure on the other hand is continuously to be plagued by high interest rate environment; that is the reason you are not seeing it perform.