Prashanth Tapse
Looking beyond and after June quarter earnings, investors are now flocking to virus-resilient sectors in the market. And despite COVID-19 severely hampering economic activity, markets consistently surged on better-than-expected June quarter earnings and on hopes of COVID-19 vaccine. Indian investor sentiment was also boosted by domestic liquidity, which continued to drive Indian equities in tandem with global markets.
Even management commentary gave the market a confident outlook to withstand businesses against the COVID spread and its impact. With unlocking formulas supporting phased re-opening of economic activity, market started discounting the severity of impact of virus spread over businesses, going forward. But it seems like more businesses are dealing with coronavirus and markets have learnt to live with it.
Here are sectors which we believe investors should focus on and invest in after June quarter earnings session:
Life Insurance a sweet spot sector: Life Insurance Corporation (LIC) clocked a sharp 40 percent month-on-month growth in individual premiums in July and August, led by a jump in the sales of big-ticket pension and term assurance plans. We believe life insurance space in India has been gaining significant traction, with top private sector players delivering strong performances over the past two to three years. We expect private insurance companies like HDFC Life, SBI Life and ICICI Prudential Life could see the same traction in premium collection growth.
Defence sector stocks to be in action on the back of Atma Nirbhar Bharat boost: The procurements will focus on indigenous design and development. Platforms and equipment worth Rs 31,130 crore will be procured from Indian companies and they will be manufactured in India. In the last 5 years, India has spent Rs 3.5 trillion on import of defence items and expects the opportunities of Rs 4 trillion in next 5 years, hence defence stocks like Bharat Dynamics, Bharat Electronics, ZenTech, Cochin Shipyard, HAL and L&T are set to benefit.
The real estate sector can see a boost in the coming quarter: The Centre makes a countrywide effort to push affordable housing and Maharashtra is considering reducing stamp duty on real estate from 5 percent to 2-3 percent in order to give a boost to the industry. The government recently appointed a committee, under the chairmanship of HDFC head Deepak Parekh, to make recommendations to boost the sector. One of its recommendations was to cut stamp duty by 50 percent. Realty & building material stocks to be focused in coming quarters. We like Kolte-Patil, Godrej Properties, Sobha, Brigade Enterprises, Raymond, Ashiana Housing etc. Paints /Tiles stocks are also to follow the trend.
Government's move to build a better infrastructure sector: National Infrastructure Pipeline will ease COVID hit on the economy. Government has identified about 7,000 projects in different sectors that will be part of the National Infrastructure Pipeline. The National Infrastructure Pipeline will play a crucial role in resurrecting the country's economy from the impact of the corona outbreak and the country is going to spend more than Rs 100 lakh crore on this. Hence we are bullish on stocks such as Larsen & Toubro, Ashoka buildcon, Dilip Buildcon, KEC International and KNR Construction.
The author is AVP Research at Mehta Equities.
Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his 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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