Shibani Sircar Kurian on 4 sectors one can be positive about now

Anshul Saigal says some people are holding cash but I would say the majority are not holding cash. What that means is that the majority are not expecting a meaningful correction while some are expecting a meaningful correction. An investor who is looking for defensives should go for FMCGs. An investor who is looking for long-term wealth creation should look at QSRs. And there are now multiple opportunities in that space to make money over the next few years.

At a time when it is not possible to find stocks that can be called “fairly valued” and forget “undervalued”, but the sentiment continues to be bullish, it is tough for retail investors to control their desire to buy stocks. The fact is that this market has been in an overvalued zone for quite some time, but as they say, liquidity and sentiment can ensure that market remains in that zone for longer than anyone expects. So, for investors, it would be wise to take exposure to stocks, where a sector the overall market size is very big or the sector has reached an inflection point where the market size will grow or they have an income stream that has an element of annuity. The reason why this strategy works is that even if the valuations are expensive at the time of buying stocks, steady growth in the industry helps in normalizing the valuations of individual stocks.

Sectors like banking and financial services, railways, infrastructure, and defence are likely to continue being favored sectors. Select manufacturing companies could perform well due to PLI schemes and production base diversification. The themes for the next few years are manufacturing, renewables, digitisation, infrastructure, urbanization, premium consumption, financialization of savings, and the rise of equity savings cult.

We believe manufacturing and allied industries like auto ancillaries, metals, defense, textiles, capital goods, utilities, logistics, corporate banks etc. will continue to remain under spotlight in the year ahead given the macro and micro tailwinds. We continue to have a favorable outlook for the banking industry, which is fueled by strong growth potential from rising loan growth and falling credit costs.

Bajaj Allianz Life Insurance's Sampath Reddy, prefers value-oriented stocks over growth and expects the market valuation to peak between 19 to 20 times PE in the coming year. Although the market valuations are slightly high, the Indian macro economy is performing well in terms of GDP growth and benign inflation, driving higher valuations. Reddy notes the shift from growth to value-oriented, higher-interest rate-sensitive utility sectors and believes it will continue.

“Segments which are linked to the broader capex side of the story, are showing good growth and the narratives are very strong. As we look towards the economic upcycle over the next few years, some of these companies are going to grow meaningfully 30-40% higher from where they are in terms of their business revenues. ”

There are some sectors where the macro structure is such that for one or the other reasons the overall growth is higher. This is not to say that growth comes without phases of slowdown, but when tailwinds come they are able to take care of all the slowdown and over a period of time, growth is much better. So, at times valuations are high, take exposure to stocks and sectors where at least there is high probability of growth ensuring that over a period of time, valuations get normalized. When we talk of market size it is not only India but in some cases global markets also. Second, look at business that is bound to grow as markets expand and every transaction brings in some money to the topline and industry structure is such that cost does not grow in the same proportion leading to higher and stable margins.

Ajay Srivastava believes that there is no need to change anything in the market. He emphasizes that it is a good place to be and that there is no requirement to reinvent the wheel or find hidden gems. He advises investors to be cautious and aware of their comfort level when investing in PSUs and railway stocks. He also highlights the importance of patience in buying and states that the government's continuity in spending will provide opportunities for investors.

Coming to consumer stocks, it is better to be pretty selective right now. I expect one more quarter of subdued volume growth. But my sense is that with the onset of the festive season post September onwards, we will start seeing consumption doing pretty well across most of the categories. So players who have really established or have a strong foothold in terms of their products, in terms of pricing and target customers like Trent are doing exceedingly well.

On a relative basis, we are not as expensive as one would have imagined simply because the entire emerging market pack has also gone up. That provides some degree of downside support to the market, even though near term, because of absolute valuations, you could see some degree of volatility. The way we have been constructing our portfolio is clearly looking at pockets of growth where earnings growth sustainability is visible.