I do not see a fundamental reason for market to move up sharply from these levels but liquidity can move it either ways in the short term, Harsha Upadhyaya,

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CIO-Equity, Kotak AMC, tells ET Now.Edited excerpts: It has been a good, solid comeback by the bulls. A month or 45 days ago, we were discussing trade war, uptick in crude, poor valuation levels but all those concerns have now taken a back seat. Suddenly, the market has become Teflon coated. Where are all the concerns and where are all the naysayers?I do not think the macro headwinds or the challenges are out of the way. Despite some of these challenges, given the kind of strong inflows from domestic retail investors and ETF flows, markets seem to have shrugged off some of those concerns. But we need to keep in mind that this rally is being driven by only a handful of stocks and all of them are top heavyweights in the index and hence the index movement seems very strong. But when you look at the broader market, there seems to be a lot of pain still in the market.How should one start looking at markets? Should one stay with defensives which is a combination of consumer and IT or is it time to start buying risk and cyclicals now?We are of the view that we should still maintain a cautious approach in portfolio construction. We believe that Barbell Strategy at this point of time would work wherein you would have defensives such as IT, pharma and a little bit of maybe even FMCG in your portfolio. On the other side, you will have some of the risky assets like corporate facing banks and others. I do not think it is time for going completely into some of those risky bets because the valuations of the overall market are not so cheap. While optically some of these beaten down sectors and stocks may look very cheap, the fundamentals do not give us enough confidence to take a larger uncore position in the portfolio.The currency fall could be a tailwind for Infosys and the larger IT sector as well as pharma names. Is that a position which you have increased tactically because it seems like for a better part of the medium term to say 18-19 months long term, the currency might be on the weaker side?We were always of the view that the currency tailwind exists only for a couple of months or quarters because a re-pricing happens with client interactions going forward. To that extent, whatever benefit you would see from a currency depreciation would sustain only for a short period and that cannot be the only argument for getting into some of the exporters. Having said that, we have seen some improvement in terms of management commentary in case of IT and also have seen their margins sustaining reasonably well. To that extent, we do have defensive positions in the IT sector which we will continue to hold. As far as pharma is concerned, one needs to be more stock specific. There are industry wide issues even today. For example, the lack of USFDA approvals still haunts the segment. I do not think one can go simply overweight on pharma without those clarities. As far as we are concerned, it is better to be in a few of the stocks where we believe there has been some amount of correction and also the fundamentals are not so bad. What is the correlation that we draw here – banks, IT or like you just mentioned IT and pharma? Typical exporters would do well. Is the entire Turkey incident spelling bad news for metals and private banks? There is an aggravated fall irrespective of SBI’s numbers. To some extent, even consumer stocks are falling. The issue with consumer segment is that volume growth has been very strong, in double digits for the last few quarters. That is continuing quite handsomely. But valuation-wise, most of the FMCG stocks are trading are at historically high level. One needs to be a little bit cautious but as long as the earnings and volume growth continue, some of these stocks will continue to perform in the market. As far as the emerging market currency crisis is concerned, we will have to wait and see how it unfolds. In the last two or three trading sessions, some of the currencies like Turkish lira or South Africa rand have fallen in double digits. That fakk is leading to some amount of selloff in emerging market currencies. Our own currency, which has been at a very sensitive level of 69 until now, today has breached that level. There is some amount of scare that is coming because of trade tariff related impact on currency and what that would mean to our currency in the next few weeks and months. I would say that this is one of the bigger concerns that we have to see at this point of time. Do you think for the year we have now topped out? Nifty at 11,000 plus, Sensex nearing 40,000. Do you think now for next four-five months we should not expect anything significant for the benchmark indices? It is very difficult to make those guesses at this point of time. In the last few months, while everyone expected the valuations will be on the higher side, the market seemed to consolidating at a particular level. We have seen Nifty performing quite well in July and also in the early part of August. When the market is driven by handful of stocks and that liquidity continues to be strong, it is very difficult to make a guess in terms of where it will stop or how it will unfold. Fundamentally, our market continues to be overvalued as far as current valuations are concerned. While one can say the earnings season has been in line with expectations, it would not help any positive change in terms of estimates for FY19 at least. In fact, FY19 earnings will get downgraded a little bit, post first quarter earnings. Given all these issues, I do not see a fundamental reason for market to really move up sharply from these levels but liquidity can move it either ways in the short term.