Investors looking to add to their existing funds or build their portfolio may consider investing in consumer, IT, auto, banking, and financial stocks, which could make up a large portion of their portfolio.
Despite muted global signals and rate hike fears, which are still very relevant from an equity markets perspective, India managed to buck the global trend and emerge as an outperformer ahead of the holidays. Diwali is celebrated on October 24, 2022.
Over the past 12 months, the global M-cap is down 15.9 percent (US$19 trillion), while India’s N-cap is up over 3 percent, a report said.
Momentum ahead of the holidays was strong as Sensex reclaimed 60k while the Nifty50 also climbed above 18k for the first time since April 2022 on Tuesday.
Benchmark Sensex and Nifty50 indices have rebounded 17-18 percent from their respective 52-week lows, but this uptrend isn’t over yet. Although we have seen bouts of profit-taking, this is more of a buy-on-dips market.
“We remain positive on the Indian market given the high conviction of a multi-year economic recovery. Accordingly, any pullback should be seen as an opportunity to buy into high-quality companies with an investment horizon of 18-24 months,” said Gaurav Dua – SVP, Head – Capital Market Strategy at Sharekhan by .
At the same time, it would be prudent to take home some profits, particularly in the high-beta areas and the broader market, he said.
As the economy looks strong, investors may be overweight in economy-focused sectors, experts suggest. Demand from consumers from both urban and rural areas has increased significantly during this festive season, it said.
“The strategy investors should employ is to keep accumulating at each level and not to look forward to book gains too soon. The prospects and guidance for the Indian economy and growth story are stronger than ever,” said Chintan Vora, Senior Vice President, 5nance.com.
“This requires the ability to buy and hold for the long term to seek better returns,” he added.
We have compiled the sectoral allocation from experts when an investor plans to put Rs 10,00,000 ahead of Diwali:
Expert: Gaurav Dua – SVP, Head – Capital Market Strategy at Sharekhan by BNP Paribas
From an investor perspective, we are overweight autos & auto parts, banks, real estate, engineering and consumer discretionary. Accordingly, these sectors should make up 60-65 percent of your portfolio allocation. The remainder could be allocated to FMCG, IT and pharma/chemical companies along with selected bottom-up picks. For the year as a whole, our favorite large-cap picks would be:
, SBI, Hindustan Aeronautical, , Titan and DLF. In the mid-cap space, we prefer Polycab, , Devyani Intl, , , and .
Expert: Pawan Bharaddia, Managing Director, Equitree Capital Advisors
We see consistently strong demand in this segment, from streets and subways to railways and therefore also for building materials. We think the government should continue spending on infrastructure due to its multiplier effect on the economy. The 2022-23 budget shows that the central government is expected to spend a record Rs 7.5 crore on raising capital in FY 2022-23.
Technical goods (15%):
In our view, the private investment cycle is accelerating strongly as most companies are expanding and India has not experienced a strong investment cycle in the last 6-7 years.
We see strong traction in the auto accessories space as supply side issues are addressed and demand revitalized across segments. We are also seeing strong demand in the textile sector as the government intends to finalize free trade deals with Europe, UK and Canada by Diwali.
Chemicals & Fertilizers (14%):
Many well-known chemical companies have experienced significant corrections in recent months, and many of them are also moving up the value chain. These factors combined with the history of China+1 should lead to good growth.
The large defense budget of INR 5.25 trillion announced in the Union budget 2022-23 and the Make In India push are helping many defense players post record order books. We expect PSUs and private actors as well as corporates in the supply chain to do well.
The government’s sharp focus on improving productivity and output should benefit this sector overall. Also, global shortage due to supply chain geopolitical constraints coupled with large domestic demand should benefit this entire segment across the value chain.
Expert: Siddarth Bhamre, Head of Research, Broker
The banking sector should get the lion’s share, not only because of its weight but also because of its positioning to generate an increase in borrowing on the back of continued consumer spending and a surge in private investment spending. With NPA levels kept under control and clean balance sheets, banks are in good shape.
Our top stock picks cover a 1-year time horizon, including names like
Godrej consumers and .
Expert: Chintan Vora, Senior Vice President,
The wave of market upswing is being driven by consumption-driven demand. In order to have a stable portfolio and create better alpha versus Nifty, we will use Financials, IT and Auto as frontrunners, Energy and FMCG as strong defensives and Specialty Chemicals as value buys in the diversified portfolio.
Our top stock picks include
with a growth theme and Astral, , and with a value theme are some of the investments to consider for a purchase with a horizon of 1 year from today.
(Disclaimer: Experts’ recommendations, suggestions, views and opinions are their own. These do not represent the views of Economic Times)