Daily Voice: These 3 sectors can potentially lead the market recovery, don't see much value upside in PSU, says Whitespace Alpha's Puneet Sharma

The markets are currently trading below their historical averages, after a fall of more than 15% in the large caps from their all-time highs. Of course the small and mid cap indices have fallen even more, giving up large gains they accumulated during the past year. While there will certainly be some more volatility in the short term due to the economic and political environment globally, there is a high likelihood that the markets are close the bottom and in a medium term view, the current prices are lucrative for entering into equity positions.

In our opinion, investors in the equity market should come with a long term perspective of generating gains. Short term volatilities, corrections and capitulations will come and go. In the long term, a well-researched, diversified and large-cap focussed portfolio should deliver investors targeted returns.

Do you think global cues will continue to dominate equity markets more than domestic cues until the end of the first half of 2025?

Indian markets are not immune to global events. In the past few years, the Indian markets were less susceptible to movements of global stock markets, typically moving in the same direction but with lesser magnitude. However, in recent months, the magnitude has matched global markets. With policy rates, tariffs and trade wars become more prominent, the relation of Indian equity markets will remain strong with the global events. And this becomes even more relevant as the domestic companies are coming off a tough couple of quarters where growth and profitability have taken a hit.

Where do you see investment opportunities after the significant correction across market caps in the recent past?

The large cap Nifty 50 index is down about 15.8% from its peak while the mid and small cap indices are down by approximately 21.4% and 25.4%, respectively. A few sectors have fared better than the Nifty 50 and may continue to perform slightly better, especially the banking and financial services sectors. Additionally, metal and industrial products are also sectors which are expected to perform well in FY26.

Is it the right time to take exposure to the PSU space?

PSU companies have fared rather poorly in the recent correction of the market, with the PSU banks being at the forefront of companies losing market capitalization. That’s one sector which may see further flow of capital from PSU banks to the private banks. The other major category of PSU companies is related to energy sector, including oil market companies. All companies in this sphere are also plagued by the vagaries of the oil prices. As such, we do not see much value upside in the PSU sector.

Which sectors will be at the forefront if the market begins to recover in the coming period?

The sectors that can potentially lead the market recovery include IT companies, metals and mining and telecom companies. We believe that the private sector banks may also see a good amount of interest from the investors as the markets stabilize and turn towards a recovery.

Do you expect a strong pickup in capex and growth in the coming financial year (FY26)?

Capex and growth will be more focussed on certain sectors and companies, rather than a broad based increase. As mentioned earlier, the IT sector, metal and telecom companies are expected to see growth, profitability across companies in these sectors will vary. Additionally, we are expecting revenue growth for companies in consumer goods and discretionary spending during the next fiscal year.

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