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Investors will be able to create wealth if they bet on stocks from sectors that are potentially in the value zone either after a recent fall or are already in momentum because of industry dynamics.
The S&P BSE Sensex and Nifty50 fell more than 7 per cent in the last 3 months. The
selling pushed the S&P BSE Sensex below 55,000 while the Nifty50 closed below 16,300 for the week ended June 10.
Realty, BFSI, and consumption are some of the sectors which have fallen in double digits in the last 3 months while auto and energy sectors managed to buck the trend in the same period.
Selling in the Indian market is largely on account of weak global cues, and aggressive rate hikes by central bankers across the globe which could squeeze liquidity, supply shock, rise in inflation, and demand contraction. The volatility is here to stay, highlights experts.
Foreign investors pulled out close to Rs 14,000 crore so far in June. With this, net outflow by foreign portfolio investors (FPIs) from equities reached Rs 1.81 lakh crore so far in 2022, data with depositories showed. Also Read
https://economictimes.indiatimes.com/markets/stocks/news/fpis-pull-out-rs-14000-cr-from-indian-equities-in-june-on-global-domestic-concerns/articleshow/92157550.cms
“It is very likely that the equity market will be volatile in the near term due to factors such as global supply chain disruption, rising interest across the globe and in India, and uncertainty around the impact of inflation on demand across sectors to name a few,” Prakash Gaurav Goel, Senior Fund Manager at
Asset Management Company Limited, said.
“The crucial factor from an Indian market context in the meantime will be inflation, crude oil price, and interest rate. From a medium-to-long-term perspective, what augurs well is the shift of global manufacturing market share to India,” he added.
Volatility is likely to continue in the near-term but long-term investors can look at buying stocks from sectors that have been facing some selling pressure and also the ones which are seeing some momentum.
“The frontline indices, as well as the small & midcap universe, tested not only important support levels but also their long-term valuation levels. The last 7 months of grinding correction has brought down valuation multiple,” Sahil Kapoor, Market Strategist & Head – Products, DSP Investment Managers, said.
“For instance Nifty P/E has fallen from nearly 24 times to less than 19 times when it traded below 16,000 levels recently. With the renewed uptick, it’s quite likely that Nifty has embarked on a journey to higher levels given that earnings growth is well supported by steady improvement in the Indian economy,” he said.
We have collated a view on sectors from various experts for medium to long term:
Expert: Suresh Soni, CEO, Baroda
Mutual Fund
We are constructive on the equity markets from a medium-term perspective. At present, we find attractive value in a number of sectors:
The sector(s)/stock(s) mentioned do not constitute any recommendation of the same and Baroda BNP Paribas Mutual Fund may or may not have any future position in these sector(s).
Banking:
Improving asset quality and resumption of credit growth could help the sector. Concern on credit quality -both the corporate sector and retail are largely behind us.
The sector had derated in the last couple of years and we are of the view that certain companies in this sector are available at undemanding valuations. Also, rising rates are expected to have a favourable impact on NIM.
Capex:
Continued push from Government on building infrastructure coupled with a revival in industrial CAPEX augurs well for the sector. For the first time in the past several years, we are seeing large CAPEX announcements across traditional sectors like Cement, Steel, and Petrochemicals as well as new-age sectors like electronics, data centre, and e-vehicles.
Real Estate:
With home affordability at the best levels in a decade and consolidation in the sector following RERA, we believe the sector is poised well.
Expert: Hemang Jani, Head Equity Startegy, Broking and Distribution,
Auto:
Auto is one sector where we believe recovery is visible on a gradual basis. The sector is trading at ~24x P/E, which is at a ~5% discount from its historical average.
We expect demand to improve for Passenger Vehicles on the back of easing supply chain issues. MHCVs are likely to benefit from the government’s push for infra activities while LCVs should gain from the last mile mobility.
The recent cut in excise duty for fuel also augurs well for CV demand though there is no immediate respite. However, there would be a slow recovery in 2Wheelers and tractor volumes.
Expert: Rajesh Cheruvu – Chief Investment Officer at Validus Wealth
Energy:
Q1FY23 should be the first year of ‘normal’ operations for corporate India post Q1FY20.
The energy vertical of India’s leading energy conglomerate is on track to deliver its best quarterly performance in more than 20 years with refining margins running almost 2x above mid-cycle. Similarly, upstream profitability is at its best ever.
Consumer Durables:
Consumer Durables should witness an uptick in margins aided by price hikes taken.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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