Bullish on economic cycle but not on market cycle in near term: Jefferies MD

India’s growth outlook is looking better but one has to differentiate between the economic cycle and the market cycle, according to Mahesh Nandurkar, managing director of institutional brokerage firm Jefferies.

“I am very bullish on the economy. The economic revival is just around the corner. We are already going through it,” he said.

However, he added a rider. “I just believe that the economic cycle and the market cycle have to be differentiated. So, while I am very bullish on the economic cycle, I am not so bullish on the market cycle at least in the near term,” he said in an interview with The Economic Times.

Stock market rally

Nandurkar said the unidirectional movement in the market has not been observed in the past and reflects the coordinated efforts of all the global central bankers.

“I feel that the longer the market runs in this unidirectional manner, greater are the chances of the type of correction that you talked about,” he said.

Capex cycle and bank lending

Nandurkar said he believes the housing market revival will eventually lead to a broader capex revival as well and there is already some initial movement on the infrastructure side as certain industries like steel are driving the capex.

“It will take two to four quarters for the broader capex cycle to be seen but we are seeing some initial signs of it,” he added.

Given the current valuations of many large private banks in India they are a better bet on the risk-reward parameter to take advantage of the capital expenditure revival in the economy, said Nandurkar.

According to him, the smaller non-banking financial companies and banks will probably give better returns. But they are not completely out of the woods in terms of the asset quality question marks. At the same time, the large banks are still trading at reasonable valuations.

“So, from the risk-reward perspective, large private-sector banks are best in my view. Within the broader banks and financials space, the non-lending part and especially the insurance side is also looking pretty attractive,” he said.