The market is unlikely to break out in a hurry and sectors which did well so far could underperform in the next one year, while the beaten-down sectors such as PSU banks, roads, metals, industrials etc. will remain in demand in the next 6-9 months.
The S&P BSE Sensex rallied by about 25 percent so far in 2017, largely on the back of P/E re-rating while earnings stayed flat. Going into 2018, earnings are likely to pick up and P/E multiple could see de-rating, Manish Sonthalia, Head Equities- PMS at Motilal Oswal AMC said in an interview with CNBC-TV18.
The market is unlikely to break out in a hurry and sectors which did well so far could underperform in the next one year, while the beaten-down sectors such as PSU banks, roads, metals, industrials etc. will remain in demand in the next 6-9 months.
Here is a list of top 6 sectors which are looking attractive:
NBFCs which outperformed benchmark indices in the year 2017 may underperform in the next 12 months. “We are going to see rate increase sometime in FY19 and rates are going to harden with inflation and twin deficit coming back could weigh on NBFCs,” said Sonthalia.
Dairy:
The dairy theme is likely to do well given the fact that PM Modi plans to double the farm income in the next 3-4 years. In the dairy sectors, the focus will be on companies who are selling liquid milk rather than value-added products because the work capital cycle and cash conversion cycle is much more favourable in liquid milk.
Midcap IT & Pharma:
In the Midcap IT segment, Sonthalia likes L&T Technology Services and in terms of pharma space, we are betting on Ipca Laboratories, and Alkem Laboratories.
Gas stocks:
We are positive on City gas distributors — Indraprastha Gas Ltd (IGL) and Mahanagar Gas Ltd (MGL). The economy is moving towards a gas economy which augers well for both the stocks. The valuations might look stretched but with PNGRB having a chairman, decision on new notified will come soon which will be positive for both these companies.
Real Estate:
Real Estate is entering into interesting times going into the future. The whole retailing space and residential housing space is witnessing a shift from unorganised to organised. The known industry plays are likely to see a bigger traction in terms of volume size as opposed to lesser known ones.
Jewellery:
In the jewellery space, Sonthalia likes Titan Company Ltd. The company is a major thematic play on the unorganised shifting to the organised. The hyper growth is here to stay.
MORE WILL UPDATE SOON!!
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