Money Control, Oct 30, 2019
Experts suggest investors to accumulate quality stocks across sectors which are likely to benefit the most from the policies initiated by the government.
Samvat 2076 started on a robust note as bulls are back on D-Street, and expectations are that we are well on track to reclaim key resistance levels to hit fresh record highs soon.
The Nifty50 hit a record high of 12,103 while the S&P BSE Sensex registered a record high of 40,312 back in June 2019.
Samvat 2075 has been an eventful year for the Indian markets. Most experts feel that the worst is almost over with respect to domestic macros and sectors which should hog limelight include financials, private banks, consumer, autos, retail, insurance, as well as, capital goods sector.
The government’s stimulus measure has lifted market sentiment and resulted in a sharp rally subsequently, and sources told CNBC Awaaz that Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman are planning a series of tax alignments for equities in the coming weeks in a bid to further boost investor sentiment.
Experts suggest investors accumulate quality stocks across sectors which are likely to benefit the most from the policies initiated by the government.
“The government has taken the historic step of a big corporate tax rate cut which would largely benefit Autos, Private Banks and Consumer sectors. Some of the other sectors where investors can look for investing and generating returns over the next 1-2 years are Retail, Insurance, multiplex, and hotels,” Siddhartha Khemka, Head- Retail Research, MOFSL told Moneycontrol.
The backdrop for the economy and earnings are improving as we step into new Samvat, and investors should use dips to accumulate quality names for the long-term. The idea is to remain invested in a few select stocks rather than making a portfolio of 50 stocks.
The market is likely to remain volatile in the near term until the economic recovery is visible. The corporate earnings are likely to remain tepid in 2019 but should pick up pace in FY21.
Brokerage firm Sharekhan expects 12 percent EPS growth in FY20 for Nifty, and estimate a strong revival of 28 percent growth in FY21
Pankaj Bobade, Head – Fundamental Research at Axis Securities told Moneycontrol that investors should be prudent while choosing stock or sector(s) and in terms of stock selection they should pick those which have strong fundamentals with quality management and invest in a staggered manner over various price points.
“From a portfolio perspective, a well-diversified portfolio with exposure in 5-7 sectors and 15-20 very good quality companies with a quarterly review of the stock in the portfolio is the best way of portfolio management,” he said.
Here is a list of sectors from different experts which are likely to hog the limelight in the next 1 year:
Analyst: Siddhartha Khemka, Head- Retail Research, MOFSL
Retail companies have started to witness increased footfalls during this festive season, which is expected to support their Same-Store Sales Growth (SSSG) for the quarter.
The insurance sector in India is in a sweet spot, where strong structural potential exits as it is highly underpenetrated.
The Indian hospitality industry appears set to enter an upcycle, led by favourable demand-supply dynamics. Currently, industry occupancy (67 percent) is near optimum levels, which in turn, should provide strong pricing power to hotel players.
Multiplex is a play on rising discretionary spend and content diversity with screen density still being one of the lowest in the world. It is still highly underpenetrated in India, thus providing strong structural growth potential.
Analyst: Pankaj Bobade, Head – Fundamental Research at Axis Securities
Private Banks & Autos:
These are some of the spaces that investors should track for the coming year. Automobiles and ancillary sectors looks good as a contrarian strategy with good risk-reward metrics.
Private & Retail banks have led earnings on India Inc amid slowdown concerns and commentary is positive in these pockets.
Analyst: Shailendra Kumar, Chief Investment Officer at Narnolia Financial Advisors Ltd
Whenever an economy comes out of a prolonged downturn, it is the financial and consumer discretionary that does best in the initial years of the next leg-up.
For now, till the economy has not bottomed, the rally will continue in the quality names from consumer staples and retail financials, but during the next year, once the economy bottoms out, it would be corporate banks and consumer discretionary stocks that would lead the next bull run.
A combination of high-quality retails banks, corporate lenders and consumer discretionary both in products and services space is the right portfolio mix right now.
Analyst: Mukul Kochhar, Co-Head Equities, Investec Capital Services Ltd
Cement & Commodity stocks:
Financials remain a very attractive sector to track & invest in. Discretionary consumption space like retail, white goods, and select autos is another space that we find very attractive. We also like the consolidation process ongoing in cement, and select commodity stocks.Analyst: Sunil Sharma, Chief Investment Officer, Sanctum Wealth Management
Industrials is also a sector we’ll be tracking next year. Particularly, companies that provide automation technology for factory buildout. We would be buyers of companies that provide infrastructure materials for manufacturing facilities.
Financial services are moving towards digital models and we’d track names to identify which companies are best positioned in the digital space.