Despite several risks emerged in the second half, the market has delivered solid returns of 19 percent since last Holi festival though it is still 7.5 percent off its record highs reached in October 2021.
Every sector participated in the run with Metal and Power being the largest gainers with 56 percent and 59 percent returns, respectively, followed by IT and Realty that surged 37 percent each. Oil & Gas, Capital Goods, Energy and Healthcare indices gained 16-32 percent, while Auto, Finance and FMCG underperformed others, registering 8-9 percent gains.
Consistent buying by DIIs amid hopes of strong earnings growth and economic growth ahead despite margin pressure in some sectors in the short term on rising commodity prices, and continuity in low interest rate environment still supported the market, though huge FII selling amid expectations of faster policy tightening by global central banks including Federal Reserve, and sharp rising in commodity prices (including oil and metals) and sanctions imposed on Russia by western world after Russian invasion of Ukraine capped the gains in second half.
The broader markets also participated in the run with BSE Midcap index rising 19 percent and Smallcap index climbing 37 percent.
Experts expect the volatility in next few months to continue due to Ukraine-Russia war and sanctions imposed on Russia, but having positive view on the market for the medium-to-long-term perspective, they advised buying quality stocks on every major dip and expect at least 10-15 percent market gains by next Holi.
"The challenge at every stage that will face markets is demand side growth coming through. There will be hiccups at different stages and the reasons could vary (sitting three months back, I do not believe anyone could predict or factor the geo-political risk and oil prices settling above $100 a barrel)," says Naveen Chandramohan, Founder and Fund Manager at ITUS Capital.
He further says rather than worrying about the risks, he would use this macro uncertainty to pick up good businesses which continue to grow cash flows, reinvest capital and gain market share. "There are multiple businesses that are doing this, and our focus would be on the micro."
Here are nine picks (mix of largecap, midcap, and smallcap) suggested by the market experts and portfolio managers that can be added to your portfolio to gain healthy returns by next Holi:
Expert: Sonam Srivastava, Founder, Wright Research
In a rising interest rate environment, banks stand to gain the most as banks and financial organizations have significant cash holdings due to customer balances and business activities that would yield high interest. On a company-specific level, recently, the Reserve Bank of India (RBI) has lifted all restrictions on HDFC Bank, permitting it to launch new digital initiatives.
As a result, the loan growth has picked up, and an uptick in net interest income (NII) growth is a big positive. We expect a market share in credit cards to stabilize and improve asset quality trends for HDFC Bank.
The bank has a reasonable valuation with high return on equity (ROE) from the valuation perspective. HDFC Bank has maintained a consistent profit growth for many years and has excellent projections.
Tata Elxsi is a multibagger midcap IT stock that outperformed last year. Tata Elexi offers end-to-end engineering solutions to their clients. Tata Elxsi is valued on the pricier side, but the revenue and profit growth is among the highest in the sector for these stocks, and it also maintains a good profit margin.
It has a good ROE and a lot of cash on hand to spend on Capex. Companies across the globe are investing in R&D to produce enticing products, which improves the prospects for an engineering research & development company like Tata Elxsi. Tata Elxsi plans to focus on electric, automated, and connected vehicles (EACV), 5G, Medical Electronics, AI & ML-driven innovative solutions, etc., in the future.
The high-interest rate environment that can inflate the currency Tata Elexi is attractive because of its global exposure.
Tata Steel has been the buzzing stock for the last year due to the upcycle in metal prices. Tata Steel is one steel sector stock that has outperformed all others. With the rising profitability due to rising steel prices, Tata Steel has cleared a lot of debt from its balance sheet and deleveraged.
The Russia Ukraine crisis has also made this stock attractive as it is serving as an alternate to the Russian-made steel for European customers. Tata Steel has a significant European presence, contributing to a bulk of revenues.
In terms of fundamentals, the valuations are below the industry average, and the profit growth has been exceptional. We expect Tata Steel to have robust prospects with a global focus on infrastructure.
Expert: Divam Sharma, Founder at Green Portfolio
Valiant Organics
The larger the distortion the more attractive the stock is. Valiant Organics has been a story we have been following for several years that is in the specialty chemicals space.
The fundamentals of the company have continuously unravelled, and yet the price has been on a decline. Zooming in, the company is producing negative cash, because the revenues are being ploughed into capex, and this capex will prove to be of tremendous value when the manufacturing begins in these new plants.
Most if not all the capex is oriented to manufacturing chemistries that are in direct competition to what China has been supplying. Solid margins, low debt, extremely comfortable valuations, and upcoming capacity ramp-up support our overall thesis.
KSB is an MNC available at comfortable valuations. The company manufactures pumps and valves for various industries.
The compelling rhetoric is the utility of these pumps. One of the segments their pipes find utility is in the FGD (flue gas desulphurization system) and nuclear space. The installation of FGD pumps in coal-powered plants is a necessity now and the company staging themselves to be a large beneficiary with the timely capex.
With the company's steady and strong order book; up trending fundamentals; healthy cashflows; and double-digit margins, we have a high conviction on its long-term performance.
Adani Wilmar commands an 18.3 percent market share in edible oil. The company is the biggest oleo synthetic producer in India.
Considering ambitious plans, we expect food and industry essential business to grow for the company over the coming quarters.
The stock looks attractive at current valuations.
Expert: Siddhartha Khemka, Head - Retail Research at Motilal Oswal Financial Services
ICICI Bank continues to witness strong growth in retail deposits and has succeeded in building a robust liability franchise over the past few years.
The bank enjoys one of the lowest funding costs among private banks, which enables it to underwrite profitable business without taking undue Balance Sheet risk.
We expect slippages to moderate significantly over FY22-24 and credit cost of 1.2 percent and 1.1 percent in FY22 and FY23 respectively for ICICI Bank.
ICICI Bank continues to remain top pick in the sector given its journey to deliver solid return ratios and growth.
Lodha is one of the largest real estate developers in India, benefitting from the recent demand pick-up and the optimism behind the expected upcycle.
Macrotech Developers is expected to benefit from: a) its around Rs 20,000 crore of completed and near-complete inventory, b) Rs 4,000 crore of QIP money to enable healthy JV/JDA (joint venture/joint development greement) deal addition, c) monetization of industrial land banks and ready commercial projects, and 4) substantial deleveraging potential through robust cash flow.
Lodha is our top pick for its favourable balance between growth potential, improving financial strength, and compelling valuations.
The deal pipeline is strong, comprising a large number of small- and medium term deals, and the management is confident about the deal momentum given the rich demand environment.
The management expects the EBITDA margin to remain in the mid-teens for the next 3–4 quarters before reverting to the high teens as the strategy execution is completed. It further highlighted that decreasing reliance on sub-contractors would be another margin lever.
The addition of 1 client each in the $10 million+ and $20 million+ buckets in Q3 indicates Zensar's progress in diversifying its client base. Since Ajay Bhutoria assumed the reins as CEO, Zensar has doubled its $20 million+ accounts to 4 that was stagnant for last 4 years. Reducing exposure to its top client is also a positive as this lowers the concentration risk.
We believe that its new sales-led strategy should help the company return to the high-teen organic growth path in FY23. We estimate USD revenue growth of 21.8 percent for FY23, up from 15.4 percent in FY22, led by sustained deal inflow and a good exit to FY22.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
