Expect markets to further go up 5-10% if NDA comes to power with strong majority: Varun Goel, Karvy Private Wealth

In an interview with ET Now, Varun Goel, Head of PMS, Karvy Private Wealth, shares his views on the markets and some sectors. Excerpts:

ET Now: Now what are you doing in your PMS? Have you exhausted your cash completely or have you taken some money off the table to sit on cash and sit on some gunpowder?

Varun Goel: We are going into the big event with almost fully invested. I do not think it will be advisable to go into the event with big cash. A lot of people who tried doing that in 2009 paid a very big cost. Of course this time things are different, the market has already run up quite a bit, but we do not know if there is one coalition which gets a very strong majority. The market still has some steam left. So as of now, we are fully invested.

ET Now: That is interesting. Now even though we have factored in a positive election outcome, there is that fear of a fractured mandate. We are going to see an explosive sell-off if we get a positive election outcome. How many more legs does this rally have?

Varun Goel: On the downside, we do not think the markets can go sustainably below 6000. Irrespective of which coalition or party comes to power, the economic recovery has actually started. The pace of the recovery would show how reform oriented the new government is going to be. If we have an NDA which is supposed to be pro-market, if we see that coalition coming to power with a very strong majority, then the markets may probably run up another 5% to 10% from these levels. Of course, earnings will have to back those in the next few quarters for the markets to really sustain there, but if we were to take a slightly longer-term call, if we were to look at the market from the beginning of a new earning cycle from a two to three-year perspective, then there is still a lot of upside left for long-term investors.

ET Now: If you are fully invested, what is it that you have bought in the last 15-20 days? Have we added any significant positions in any of the cyclical stocks?

Varun Goel: One has to be very-very careful in terms of what one is buying. I do not think I would want to buy into sectors or themes where there is no earning backing. So private sector banking names, some large cap infrastructure names and IT and pharma, these continue to be the preferred sectoral pick for us at this point of time. If we look at the earnings which have come out so far, most of these sector and companies have delivered a decent earnings growth. We are not yet going into sectors which show no signs of revivals. For instance, several construction, infrastructure, power companies have shown no sign of earnings revival and I do not think it is going to happen anytime at least for the next two to three quarters. So one needs to really be cautious and not get carried away by the rally. Quality companies with good earnings and growth is what one would want to be invested in.