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Sonthalia pointed out that some companies potentially set to be included in the futures and options (F&O) segment are trading at lofty valuations and could see ‘serious price damage’.
However, he is not worried about Zomato, which is also a potential F&O entrant. This is because fundamentals will also play a role.
“Zomato, which we own, I think the street will get surprised on numbers on FY26, FY27, and even FY28. I don’t think really that this is a name where you have a case of an overvaluation. This whole quick commerce thing is tripling of dark stores by FY26, it’s all yet to play up. We remain invested,” he said.
Overall, he believes only around 25% of the market is worth investing in from the point of view of valuations.
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“Financials is one area to hide, there is ample margin of safety here. There is IT and pharma. These are three sectors to overweight on,” he said.
The ones to go underweight or equal-weight are capital goods, railways, and defence, as these sectors can go through some serious time and price correction, he added.
The entire building material space has been going slowly ever since the announcement of the elections.
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If the housing sector gets a fillip due to fund allocation, post general elections, because of various schemes by the government, he expects the entire building materials will go through an uptick.
This includes the paints sector where margins could be boosted due to a decline in crude oil prices as well.
“The paints sector is due for some revival. Second half of FY25 or first half of FY26 – the entire building material space and specifically the paints sector is likely to do well,” he said.
He prefers to avoid the electric vehicles (EV) and the semiconductor spaces as they still have a long way to go.
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