Investors will be able to build wealth by betting on stocks in sectors that are potentially in the value zone, either after a recent decline or already booming due to industry dynamics.
The S&P BSE Sensex and Nifty50 are down more than 7 percent in the past 3 months. the
the sell-off pushed the S&P BSE Sensex below 55,000 while the Nifty50 closed below 16,300 for the week ending June 10.
Real estate, BFSI and consumer are some of the sectors that have fallen by double digits in the last 3 months, while the auto and energy sectors managed to buck the trend in the same period.
Selling in the Indian market is largely due to weak global signals and aggressive rate hikes by central bankers around the world, which could reduce liquidity, trigger a supply shock, increase inflation and a contraction in demand. Volatility is here to stay, experts point out.
Overseas investors have withdrawn nearly Rs 14 billion so far in June. With this, the net outflow of foreign portfolio investors (FPIs) from the shares reached Rs 1.81 crore so far in 2022, data from depositories showed. read also
“The stock market is very likely to be volatile in the short term due to factors such as global supply chain disruption, increased interest around the world and in India, and uncertainty around the impact of inflation. in demand in all sectors, to name a few. said Prakash Gaurav Goel, Senior Fund Manager at Asset Management Company Limited.
“Meanwhile, the crucial factor in the Indian market environment will be inflation, crude oil prices and interest rates. From a medium to long-term perspective, what bodes well is the shift of global manufacturing market share to India,” he added.
The volatility is likely to continue in the short term, but long-term investors may want to consider buying stocks in sectors that have faced some selling pressure and also those that are experiencing some momentum.
“Blue chip indices, as well as the small and mid-cap universe, tested not only important support levels, but also their long-term valuation levels. The last 7 months of grinding correction has lowered the valuation multiple,” said Sahil Kapoor, Market Strategist and Head of Products, DSP Investment Managers.
“For example, Nifty P/E has fallen from nearly 24x to less than 19x when trading below 16,000 levels recently. With the rally renewed, it is very likely that Nifty has embarked on a journey to higher levels as earnings growth is well supported by the steady improvement in the Indian economy,” he said.
We have compiled a vision on sectors of several experts in the medium and long term:
Expert: Suresh Soni, CEO, Baroda
Investment fund
We are constructive on equity markets from a medium-term perspective. Today, we find attractive value in several sectors:
The sector(s)/share(s) mentioned do not constitute a recommendation thereof and Baroda BNP Paribas Mutual Fund may or may not have a future position in this sector(s).
Banking:
Improved asset quality and a resumption of credit growth could help the sector. Concerns about credit quality, both in the corporate and retail sectors, have largely been left behind.
The sector has devalued in the last two years and we believe that certain companies in this sector are available at undemanding valuations. In addition, the increase in rates is expected to have a favorable impact on the NIM.
capital expenditures:
The government’s continued push in infrastructure construction, coupled with a revival of industrial CAPEX, bodes well for the sector. For the first time in recent years, we are seeing big CAPEX announcements in traditional sectors like cement, steel and petrochemicals, as well as in new age sectors like electronics, data center and electric vehicles.
Real estate:
With housing affordability at the best levels in a decade and consolidation in the sector post-RERA, we believe the sector is well positioned.
Expert: Hemang Jani, Head of Equity Strategy, Brokerage and Distribution,
Auto:
The automobile is a sector in which we believe that the recovery is gradually visible. The sector is trading at ~24x P/E, which is ~5% off its historical average.
We expect demand to improve for passenger vehicles thanks to the easing of supply chain issues. MHCVs are likely to benefit from the government’s push for infrastructure activities, while LCVs should benefit from last-mile mobility.
The recent reduction in fuel excise duties also bodes well for CV demand, although there is no immediate respite. However, there would be a slow recovery in 2Wheeler and tractor volumes.
Expert: Rajesh Cheruvu, Chief Investment Officer at Validus Wealth
Energy:
Q1FY23 should be the first year of ‘normal’ operations for Indian companies after Q1FY20.
The power vertical of India’s leading energy conglomerate is on track to deliver its best quarterly performance in over 20 years with refining margins nearly 2x mid-cycle. Similarly, upstream profitability is at its best.
Durable consumer goods:
Consumer durables should see a rebound in margins helped by realized price increases.
(Disclaimer: The recommendations, suggestions, points of view and opinions given by the experts are their own. These do not represent the views of the Economic Times)
