The market rebounded after correcting on Monday. The Nifty is trading in a new 10,900-11,000 range after last week's rally. This shows that it may consolidate for a while before moving higher to reclaim earlier record highs.
Performance has been seen only in largecaps and not in mid- and smallcaps as domestic mutual funds. Frontline stocks are finding favour in the current economic environment as they are safer to invest than mid- and smallcaps, although they are a bit selective in midcaps.
Uncertainty in economic policies and falling May industrial output to 3.2 percent from 4.9 percent jump in April indicates that the demand has fallen, Ajay Srivastava of Dimensions Corporate Financial Services told CNBC-TV18. "The current environment is not conducive for investors. In such a scenario, smaller companies are hit badly than bigger ones."
The Nifty Midcap and Smallcap indices fell around 2.7 percent and 3 percent, respectively, on Monday. In fact, these indices are still down 13-14 percent in 2018 till date.
FMCG
Srivastava holds FMCG stocks. Sector major attribute the robust Q1 earnings to a pick up in rural demand, road infrastructure, et al, but Srivastava feels the same is due to competition disappearing from the market and partly due to demand.
"These are underinvested stocks as the retail portion is very small. Mutual funds money is moving into largecaps, which is why there has been a rally in FMCG stocks." He expects earnings to drive these stocks higher.
Entertainment
The recent fall in PVR, he said, is an opportunity for investors. The Bombay High Court allowed cinemagoers to bring their own foods into cinema halls, but Srivastava feels the case will be struck in court.
He has been increasing exposure to these stocks as the industry is doing very well. "Let these companies run their business properly. This is the only industry that has international experience and are running their business amid competition from players like Amazon and Netflix."
He feels the damage is complete in PVR and Inox Leisure.
PharmaSrivastava said the rally in pharma stocks is intact. "For companies which deal in dollars, the first two quarters of FY19 won't see any major earnings impact. Movement in the rupee-dollar will start taking effect in the third and fourth quarters due to new hedging policies."
He advises investors to keep on investing in bigger pharmaceutical companies as they will offer better returns going forward.
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