Moneycontrol
Aug 08, 2017 11:31 AM IST | Source: CNBC

Choose to stay with winning stocks! Demand revival important ahead of Diwali

Over the last 12 months, midcaps have delivered 25 percent returns, as against 17 percent by the Nifty. Also, over the last five years, midcaps have outperformed the Nifty by 65 percent. Midcaps now trade at a 14 percent premium to the Nifty on a P/E basis.

The Indian market has already rallied above 20 percent so far in the year 2017 led by a surge in liquidity.

But, there is one pattern which seems to common in equity market not just in India but across the globe and that is a handful of stocks are pushing indices higher, Ajay Srivastava, CEO, Dimensions Corporate Finance Services said in an interview with CNBC-TV18.

“Indian market is reacting to a global phenomenon is that global indices are driven by lesser and lesser number of stocks. Even if we look at the Indian market, the investors should pare their holding from losers and concentrate only on winning bets,” he said.

Over the last 12 months, midcaps have delivered 25 percent returns, as against 17 percent by the Nifty. Also, over the last five years, midcaps have outperformed the Nifty by 65 percent. Midcaps now trade at a 14 percent premium to the Nifty on a P/E basis.

Srivastava further added that the market breadth will slowly narrow going forward. That should perhaps party explain some bit of cooling in midcaps. So general buying is over and people will concentrate more on specific buying. We will see thinning out of midcap buying to some select stocks.

Consumer Discretionary:

Commenting on consumer discretionary space, Srivastava is of the view that who MSME sector is going to face virtual endangerment if not extinction in the next 3-5 years.

The bright side, companies like Bata, Arvind and Titan have shown what shape the corporate sector will look like in the next few years. “Don’t look at this today, I think the wheels have been set in motion for the decimation of MSME sector or small companies,” he said.

Even if the economy grows at 5-6 percent, these companies might grow at much larger rate because market share will move. Investors can safely bet on the stocks in this sector either at current levels or on dips.

The caution is demand revival in the next three months. “This is a festive season – Diwali is early and if we can’t get the demand revival in these three months, it won’t happen in the next 6 months either,” explains Srivastava.

Metals:

Metal stocks emerged as clear outperformers amid sharp selling seen in other sectoral indices, led by gains in Hindalco, Vedanta, Tata Steel, Nalco, SAIL, and Hindustan Zinc.

The metal story is building up purely because it was under owned to a large extent, the deleveraging process is now stabalised and people are able to make enough EBITDA to repay the debt, the yields have now started to inch higher because of dividends and lastly, the global refinancing window for metal companies have opened up.

A lot of money is not getting raised abroad at good rates which can help these companies to refinance existing debt, explains Srivastava.

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