Moneycontrol
Nov 15, 2017 08:56 AM IST | Source: Moneycontrol.com

Bet on winners! Top 5 sectors which could emerge as a dark horse in next 1-2 years

Analysts’ advise investors to churn their portfolio and increase weight in sectors which are still under-owned and can outperform markets in the next 1-2 years. It makes sense to invest in companies in sectors such as consumption, infrastructure, IT, telecom as well as BFSI.

Kshitij Anand @kshanand
 
 
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India market has seen a tremendous run so far in the year 2017 and if you stayed put last year when things turned volatile, chances are you might be sitting on huge pile of cash.

But, will the current strategy deliver returns in 2018 as well. Well, we asked different experts on sectors which are currently not in flavour but could emerge as a dark horse in the next 1-2 years.

Analysts’ advise investors to churn their portfolio and increase weight in sectors which are still under-owned and can outperform markets in the next 1-2 years. It makes sense to invest in companies in sectors such as consumption, infrastructure, IT, telecom as well as BFSI.

“Investors who have the time and skills to actively manage their portfolios should look at adding alpha through active churn or rebalancing of their portfolios,” Gaurav Dua, Head of Research, Sharekhan told Moneycontrol.

“We expect buying interest to continue in certain pockets of stocks and select companies. Consumer discretionary companies could see buying interest as the adverse impact of GST eases out and domestic demand picks up in the second half of FY2018,” he said.

We have collated a list of top five sectors from different experts which could turn out to be a ‘Dark Horse’ in the next 1-2 years:

Consumption

Consumption as a sector should pick up steam especially after the GST Council on Friday slashed rates on 178 items to 18 percent from 28 percent. The move is likely to benefit stocks in the consumption space.

The government has initiated many policies focused towards reviving growth in rural India which should also aid in boosting rural income, suggest experts.

“We believe growth story in consumption will continue going forward as pick up rural demand will be reflected in earnings in the coming quarters. Sectors such as consumer durables are expected to be benefited from the rise in demand in the rural India,” JK Jain, Head of Equity Research at Karvy Stock Broking told Moneycontrol.

Infrastructure

The other sector which could see big gains is infrastructure sector which includes stocks in cement, housing, road and highway construction, and even metals related categories.

Last month Modi government approved the biggest highway construction plan so far in the country, to develop approximately 83,677 km of roads at an investment of Rs 6.92 lakh crore by 2022.

The Bharatmala Project would be funded via CRF funds, budgetary allocations and monetisation of projects. NHAI bonds could be one of the ways of raising funds.

“Infrastructure theme mainly involved in road construction and port development sector, which may be a direct beneficiary from the Bharatmala & Sagarmala projects and many new orders are expected to flow into these sectors in the coming quarters,” said Jain of Karvy Stock Broking.

“Thus, with a boost in infrastructure, commodity (cement and metals) will also see a boost in their sales going forward,” he said.

Gaurav Dua, Head of Research, Sharekhan also added that construction companies would immensely benefit from the aggressive capital expenditure by the government to support the economy (Sagarmala and Bharatmala projects).

Telecom

The telecom sector is going through massive consolidation especially after the launch of Reliance Jio, and the competition among the incumbents is likely to remain intense.

Last month Bharti Airtel acquired the consumer mobile business of Tata Teleservices and Tata Teleservices (Maharashtra). The companies said the deal is on a no-debt, no-cash basis, implying Airtel is not taking over any of the about Rs 40,000 crore debt with Tata Teleservices and is neither paying any cash.

In November, Idea Cellular board approved the sale of its subsidiary Idea Cellular Infrastructure Services (ICISL) — the standalone tower business — to ATC Telecom for an enterprise value of Rs 4,000 crore. The sale is likely to be completed in the first half of 2018.

Global rating agency, Moody’s in a report last month said that the competition in the Indian telecom sector is expected to remain intense over 12-18 months despite consolidation as leading operators look to safeguard their turf.

“While consolidation activity is positive for the industry in the long-term, we still expect competition to remain intense over the next 12—18 months as leading operators — like Bharti, Vodafone India, and Reliance Jio Infocomm Limited — look to protect and grow market share,” it said.

Dua of Sharekhan said that the consolidation in telecom services space and rationalisation of discounts (gradual unwinding of aggressive launch tariffs by Reliance Jio) could potentially change the dynamics of the telecom services space.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

IT

Fall in rupee has boosted demand for exporter especially IT and pharma stocks. However, analysts still advise investors to be stock specific. IT exporters such as Infosys, TCS and Wipro benefit from fall in rupee as nearly 75 percent of their revenues come from the US or the contracts are billed in US dollars.

“IT and pharma space might turn out to be Dark Horse given their strong cash generating capabilities might be interesting spaces to look for money-making opportunities,” Ramnath Venkateswaran, fund manager – equity, LIC MF told Moneycontrol.

BFSI

Banking Financial Services and Insurance (BFSI) is one sector which has not performed in the short term well but holds tremendous potential. The New India Assurance (NIA) IPO, the latest from the insurance sector to hit D-Street in November, listed at a discount.

Most brokerage firms recommended a ‘Subscribe’ rating to NIA citing good business potential, highlight valuation concerns as well.

“India is largely under-penetrated in the insurance segment, provides brighter future prospects. Travel Tourism and Leisure: Rising Middle class and disposable income provide great visibility for the sector,” Devarsh Vakil, Head – Advisory (Private Client Group), HDFC Securities told Moneycontrol.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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