Financials which have participated in this rally have been outperformers and going forward it seems they will continue to outperform, said Rahul Shah, Senior Executive, Motilal Oswal Financial Services, in an interview with ETNOW. Shah is bullish on ICICI and Axis among largecaps and DCB among smaller caps.

Edited excerpts:

What is the sense that you get with the market levels and the way some of these largecap stocks have moved last 45-50 days and are now taking a breather?

Broadly, the financials which have participated in this rally have been outperformers and going forward it seems they will continue to outperform.

All the heavyweights on Nifty like HDFC, Axis, ICICI Bank, HDFC Bank are close to 52-week high and Reliance is at 52-week high. Going forward, also it looks like that they will do well. If you look at Nifty as a whole, there is a lot of room for upward movements from here — maybe 3-4%, I would not be surprised if the Nifty crosses 12,000 or so. In the near term, that is easily achievable looking at the current market scenario and the way flows are there from FIIs perspective.

Some spark came into the auto, cement packs. These are sectors that have not done well. Are they playing the catch up role of liquidity or do you think too much has happened as far as auto and cement are concerned and things should just look better from here on?

Yes, there is too much pessimism and under-ownership in auto as well as cement. In select auto stocks, because of the NBFC liquidity squeeze, we saw some underperformance and the numbers have been bad for a few auto companies. But the fall has been too much. We saw some kind of catch-up by Maruti where we saw 6-7% momentum building up post the monthly numbers. In my view, a few select auto companies look very interesting from here. We can believe that the worst is behind us and at least for the next couple of quarters we should see interest coming back in auto pack.

Now coming to cement, the sector was under-owned and is an under performer since more than a year or so. So, theres something to catch up on that too and valuations were also attractive for a few select companies where we saw momentum building it up.

There was the RBI policy meet this week we saw a 25 bps cut and talks about liquidity. Was it completely in line with estimates and is that why markets did not react?

That was factored in even at the last policy meeting. The RBI Governor had indicated there would be more rate cuts going forward. It was discounted by the markets. Thats why the immediate reaction was neutral. The markets did not cheer up and Nifty went flat or negative on that particular day.

Mutual fund largecap diversified funds are tending to underperform and missing the rally in a big way. Would that impact the flow or would it play a catchup over a period of time?

We are seeing that the upmove has been focussed on 8-9 stocks and they have been outperforming the markets since the last few months. The mutual fund portfolios are going to be different and obviously there is goRead More – Source