The 10th series of Market view and stocks to buy comes at a time when stocks have rallied 20% to 100% in anticipation of an economic revival. Since the past two years, we have continuously highlighted that there is immense wealth to be created in the stock markets and we are happy to see a part of that thesis playing out. Our opinion is that this is a start of a multi-year bull market and that wealth will be created over the next five years. Also, it is the only way (apart from real estate) for working professionals to give wings to their financial aspirations.
What’s our market view?
The stock markets have literally been on steroids since the time this Narendra Modi let government secured the most decisive majority in 25 years. The corporate boardrooms as well all the dealing rooms at fund houses have been brewing with hope and optimism about a better India. Reflecting similar optimism, stocks have rallied 20% to 100% under the premise that Indian economy will turn around and corporate earnings will expand. The two pertinent questions are – 1) Will the Narendra Modi led government orchestrate a turnaround in the economy?and 2) Is there an upside in the market post the sharp rally?
India is on the cusp of a cyclical recovery and the Modi led government lends additional hope – babus are working 9am to 9pm for the first time and that too with strict deadlines. Although there have been no big bang announcements from the Government, the machinery is working hard to tame food inflation, revive stranded projects, improve the coordination levels between the Centre & states and attract fresh investments to kick-start the economy. These measures could translate into a gradual revival in the Indian Economy and a return to the 8% GDP trajectory by FY17. This would mean further upside to the stock markets. Not to say that the journey will have its own share of volatility, which we would think of as buying opportunities.
Which sectors/ themes do we like?
The economic revival will throw up immense opportunities in logistics, irrigation, defense, capital good and the banking space. We continue to dislike over-leveraged companies like DLF, JP Associates, Suzlon, Lanco, etc. We also believe that large cap FMCGs such as HUL, Marico and ITC would deliver sub-normal returns.
P.S: Equity as an asset class in extremely rewarding in the long term, however only individuals who can bear interim volatility should invest in stocks. Kindly consult your investment advisor before acting on advice provided here.