Shrikant Chouhan of Kotak Neo identifies the recent 4 percent Nifty correction as an attractive entry point for investors, suggesting a focus on fundamentally strong large-cap, private banking, defence, and pharmaceutical stocks.

Market Outlook and Valuation

The recent 4 per cent slide in the Nifty index has brought the market to a crucial and attractive valuation reset level for investors looking at medium-to-long-term returns, Shrikant Chouhan, Head of Equity Research at Kotak Neo, said on Tuesday. Speaking exclusively with ANI, Chouhan noted that the market has repeatedly tested key support levels and appears well-positioned despite ongoing global volatility. "Fundamentally, we are very clear that if someone enters at these levels with a view of the next 6 to 12 months, we can see positive returns," Chouhan said. He highlighted that market valuations have corrected significantly compared to previous years.

Technical Analysis and Market Volatility

On technical parameters, Chouhan pointed out that Nifty has consistently found strong support around the 22,200 mark. "Technically, multiple times the market has taken support around 22,200," he said. "If the market manages to cross the level of 22,800, then we can expect a quick recovery towards 23,200."

Addressing the heightened volatility in mid-cap and small-cap stocks, Chouhan explained that profit-taking in high-beta counters is largely driven by key global events, including the US Federal Reserve's policy outcome and upcoming elections in Israel and the US. "Smart investors must have taken some profit on high-beta stocks... and entered into those large-cap stocks which are fundamentally strong and having little downside," Chouhan stated. He advised investors to remain flexible and build exposure in select mid-cap and small-cap companies alongside large caps over the long run.

Macroeconomic Factors and Sectoral Strategy

Global Challenges

On global macroeconomic factors, Chouhan expressed caution over elevated crude oil prices and interest rate trajectories. "The commentary will remain hawkish," Chouhan warned, referring to central bank policies. "In case crude goes above the mark of 120, then it may spoil the show." He also noted that market sentiment faces minor pressure due to India’s limited exposure to AI-driven tech sectors compared to global peers. However, solid domestic quarterly earnings continue to provide underlying stability.

Preferred Sectors

Outlining sectoral opportunities, Chouhan favored private banking, defence, and pharmaceutical segments. "Private banks, I think there we are bullish... From the defence space also, we are selectively bullish," he said. He added that pharma companies, particularly in the CDMO space, show strong growth potential following Q2 results. Conversely, Chouhan recommended caution regarding insurance, hospitals, and commodities. He noted that regulatory interventions affect healthcare and insurance, while commodity stocks face near-term pressure from a rising US Dollar Index.

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