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Ketan Karani, VP- Research, Kotak Securities feels that for a long-term investor, who has six-months to three-year horizon, the valuations are fairly decent to start investing. "The market is not in a bear phase. Yes, some technicals levels have been violated. But that does not mean that the market is in a bear phase," he told CNBC-TV18.

Excerpts from CNBC-TV18’s exclusive interview with Ketan Karani:

Q: Would you say that the valuations have now turned good enough for people to come in and buy a part of their intended purchases or do you think that more mouthwatering valuations are just around the corner?

A: I think for a long-term investor, who has six-months to three-year horizon, the valuations are fairly decent to start investing. People were talking around 21,000 - we are 19 times and we are overvalued; right now, we are at 13.5 or 14 times - we are reasonably and rightly valued for investment themes to emerge. Very clearly, there are a lot of people who think that we are in a bear phase or there is something very bad about the economy. The economy, which one always discusses, is going to grow 8.7% over the 9.6% - so we are not in an economic slowdown. Yes, there is a rate change slowdown.

The market is not in a bear phase. Yes, some technicals levels have been violated. But that does not mean that the market is in a bear phase. The market will always give this kind of things, which are going to take the technicals on a wrong side also. What was wrong in January and what we have said very categorically is that there is euphoria and similar thing applies today - that there is a wrong, which is on the negative side also.

We have been arguing for investments and we have been asking people to start investing at least in a moderate way because there is less confidence. We have been quite positive on the markets from the current valuations level; which look really mouthwatering.

Q: But the big problem really is the lack of liquidity and we have not seen that kind of support coming from the foreign investors for sure and even mutual funds at the moment are still sitting on cash as it were and not deploying the kind of money they have. Retail investors have actually been scared off. So what kind of falls can possibly be expected? Would you say that there is a bear phase, which some people talk about? What are the depths you are looking at and what sectors or stocks, are you really advising people to pickup?

A: Very clearly, markets can correct as there are international events which are going to unfold, which might be quite detrimental to global scenario. US-Dollar can correct and all those things can happen. But if one takes a look at India as an economy, it is one of the most isolated cases where the global events do not matter too much for the country like ours, which is the growing on internal growth and consumption story. Very clearly, if India is going to grow at 8.7% or may at 8% - let us take a hypothetical view - then also we would be groing substantially on the economic front.

Corporate profits are supposed to grow 20-22% and some of the bad news or most of the bad news is priced in. Always it’s the last 10% fall which gives the maximum pain and this is the maximum pain which is being felt over here. Sectorwise, we would be comfortable with the metals pack.

We believe that steel and iron ore would do very well. Coal is an unlisted entity so we are not looking at it too much over here. Some of the sectors like capital goods that have been beaten down out of proportion, something like L&T. It is maybe down 40% from its peak - it was at around Rs 3,700 and now it is at Rs 2,500-2,600. So, capital goods offers a great opportunity, India centric stories offer a great opportunity.

I think cement has beaten down out of proportion for the last 8-9 months, and it offers great valuation. Some of the midcaps like Kesoram are available at 3-4 times forward P/E. I think these are great buys from a long-term investment horizon.

Having said that, there can be a lot of events that can unfold; which can be damaging to the international markets, which can also impact us. But I think from here going forward, the upside looks more reasonably to be looked at,rather than the downside.

Source: Moneycontrol.com