Stock market: HDFC Asset Management Company's Fund Manager (Equity) Srinivasan Ramamurthy has said in an interview with Moneycontrol that although banks are currently the first priority in the financial sector, attractive investment opportunities are also visible in many other pockets of this sector. He says a bullish trend is visible in insurance and select lending financiers (NBFCs) .

Market valuation is expensive.

He also believes that the market valuation is high at present. Most segments (especially midcap and smallcap) and most sectors are trading at a significant premium to their long-term average multiples. In this conversation, he further said that although corporate fundamentals remain strong, the market's willingness to digest bad news may be limited. This asks us to be a little cautious about making aggressive bets.

Prospects favorable for gold

Ramamurthy thinks that the outlook for gold remains favorable. Despite the weak correlation with real rates in recent years, gold remains an attractive asset and a potential decline in real rates could support gold prices. Srinivasan has over 15 years of experience in the equity markets. He is an engineer by qualification and has an MBA from IIM-Calcutta.

Srinivasan Ramamurthy says that the outlook for different commodities can vary considerably. Conditions remain favorable for gold. Despite the weak correlation with real rates in recent years, gold remains an attractive asset and a possible decline in real rates can support gold prices. Apart from this, the ongoing uncertainty due to geo-political reasons and the risk aversion among investors can lead to a rise in gold. Apart from this, fear of weakness in the dollar can also support gold.

The bank's valuation is good, the risk-reward ratio is also better

Ramamurthy further said that it is true that the interest rate reduction will reduce banks' lending yield faster than the re-pricing of deposits. This may put pressure on margins. However, it will not have much impact on the overall profitability of banks. Currently, the valuation of banks looks good. The risk-reward ratio of this segment is also better.

Keep an eye on the IT sector

Srinivasan Ramamurthy said that given the recent surge in share prices in the IT sector, the risk-reward ratio of the sector appears balanced. Growth prospects are unclear due to concerns over a hard/soft landing in the US as well as weak discretionary spending. However, this is a sector that needs to be watched closely and could prove to be an interesting recovery play if there is a sharp correction due to global concerns.

Talking about his favorite sectors, Srinivasan Ramamurthy said that at present value is seen in the financial sector and select sectors like infrastructure, logistics, housing, consumer discretionary, and healthcare .