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Last Updated : May 11, 2020 04:07 PM IST | Source: Moneycontrol.com

Slideshow | Check out Axis Securities view on the sectoral indices

Check out why Axis Securities remain underweight on auto, bank, oil & gas, capital goods, cement and overweight on consumer staples, IT, pharma and telecom space.

Axis Securities believes there will be a wide of range of opportunities for quality companies across sectors; however, it believes that some themes are more likely to play out and benefit the leader companies in that space disproportionately. It has recommended ICICI Bank, MindTree, HCL Tech, Manappuram, Biocon, Escorts, Minda Industries, Bharti Airtel, Aarti Industries and Varun Beverages.
1/14

Axis Securities believes there will be a wide of range of opportunities for quality companies across sectors. However, it believes that some themes are more likely to play out and benefit the leader companies in that space disproportionately. It has recommended ICICI Bank, MindTree, HCL Tech, Manappuram, Biocon, Escorts, Minda Industries, Bharti Airtel, Aarti Industries and Varun Beverages.

Axis Securities remained underweight on automobiles space. The Indian automobile sector will continue to witness immense pressure on volumes in FY21 and its revival seems unlikely before Q4FY21. CV cycle will continue to be under pressure for even more prolonged period. 2-wheeler and PV are expected to revive earlier but growth will remain sluggish. Rural demand is likely to be better than urban demand, and tractors are expected to perform better than most segments.
2/14

Axis Securities remained underweight on automobiles space. The Indian automobile sector will continue to witness immense pressure on volumes in FY21 and its revival seems unlikely before Q4FY21. CV cycle will continue to be under pressure for even more prolonged period. 2-wheeler and PV are expected to revive earlier but growth will remain sluggish. Rural demand is likely to be better than urban demand, and tractors are expected to perform better than most segments.

Axis Securities also remained underweight on banking and financial services sector. According to research house, the challenges for NBFCs, Microfinance and Small Finance banks will be very large and consolidation seems inevitable. A significant number would need to raise capital. Thus, large private banks which have solid capital adequacy are well placed in the current circumstances while allocation to other financial services should be limited.
3/14

Axis Securities also remained underweight on banking and financial services sector. According to the research house, the challenges for NBFCs, Microfinance and Small Finance Banks will be very large and consolidation seems inevitable. A significant number would need to raise capital. Thus, large private banks which have solid capital adequacy are well placed in the current circumstances while allocation to other financial services should be limited.

Research house recommended underweight stance on the capital goods space. With the marked slowdown because of COVID19, the demand scenario will witness a major slump. Thus, both government as well as private capex will be very sluggish.
4/14

The research house recommended underweight stance on the capital goods space. With the marked slowdown because of COVID19, the demand scenario will witness a major slump. Thus, both government as well as private capex will be very sluggish.

Axis Securities recommend underweight stance on the cement sector but will be closely reviewing the pricing scenario post the complete lifting of lockdown. The cement sector has had pricing power and it has managed to withstand tough times better but the current challenges will have significant repercussions on the industry structure and pricing scenario.
5/14

Axis Securities recommended underweight stance on the cement sector but will be closely reviewing the pricing scenario post the complete lifting of lockdown. The cement sector has had pricing power and it has managed to withstand tough times better but the current challenges will have significant repercussions on the industry structure and pricing scenario.

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6/14

Axis Securities believes that the consumer staples sector will be one of the earliest to revive. Moreover, most companies in the space are debt-free and have a solid balance sheet. Notwithstanding the valuation challenges, the consumer staples space has consistently delivered returns for shareholders. It believe the trend is sustainable for the next 12 months and recommend an overweight stance on consumer staples.

The consumer discretionary space is a mixed bag with large ticket consumer discretionary will take time to revive but the small ticket discretionary could revive faster. Segments like skin care, beverages, apparels and others could revive while large ticket discretionary like white goods could take longer. Axis Securities recommend equal weight stance with positive outlook on small ticket discretionary segment.
7/14

The consumer discretionary space is a mixed bag with large ticket consumer discretionary will take time to revive but the small ticket discretionary could revive faster. Segments like skincare, beverages, apparels and others could revive while large ticket discretionary like white goods could take longer. Axis Securities recommends equal weight stance with positive outlook on small-ticket discretionary segment.

Research house recommended an overweight stance on information technology space. There are challenges in the IT sector as global discretionary spending on IT will reduce significantly but the sector will still see some benefits of currency tailwinds. In the near term, visibility on revenues is a challenge but it is still better than many other sectors.
8/14

Research house recommended an overweight stance on information technology space. There are challenges in the IT sector as global discretionary spending on IT will reduce significantly but the sector will still see some benefits of currency tailwinds. In the near term, visibility on revenues is a challenge but it is still better than many other sectors.

The metals and mining sector will be impacted by global challenges and the impact on the Chinese economy. Pricing environment will remain subdued for a significant period and this will have an impact on the companies in the space. We recommend an underweight stance on the metals and mining sector.
9/14

The metals and mining sector will be impacted by global challenges and the impact on the Chinese economy. Pricing environment will remain subdued for a significant period and this will have an impact on the companies in the space. We recommend an underweight stance on the metals and mining sector.

Crude_Oil
10/14

First time in history the oil prices have traded in negative territory. Historically lower oil prices have provided limited support to GRMs which are likely to be under pressure. Thus, both upstream and downstream will be under pressure because of demand challenges. We are likely to witness a significant amount of volatility in the prices and recommend an underweight stance on the oil & gas sector.

The challenges are significant for the pharma sector but there is value in the sector and many stocks offer solid growth potential. Axis Securities believe the re-rating is likely to sustain over the medium term and hence recommend an overweight stance on the sector.
11/14

The challenges are significant for the pharma sector but there is value in the sector and many stocks offer solid growth potential. Axis Securities believe the re-rating is likely to sustain over the medium term and hence recommend an overweight stance on the sector.

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12/14

Axis Securities remain underweight on real estate space. Over the medium to long term, the impact on commercial real estate could be even more significant as companies bring sweeping changes to their business models or significantly reduce expansion plans. The residential space was sluggish and the current slowdown will further aggravate the challenges of the sector.

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13/14

Apart from the long-term theme of shift in supply chain, the manufacturing of many speciality chemicals is part of essentials and the facilities have started opening up. The decline in raw materials prices could also help the margins and reduce working capital needs, however, input costs are a pass-through for most companies and benefits could be limited. Overall the speciality chemicals industry is likely to continue to perform well in the medium term and hence Axis Securities recommend an overweight stance on speciality chemicals sector.

Telecom has become the most critical sector during the current challenging times to keep the businesses up and running. Price growth in the sector has sustained unlike the past instances and more likely to improve in the forthcoming quarters. The industry is highly consolidated with two strong and one weak player in the wireless space. Axis Securities recommend an overweight stance for telecom the sector.
14/14

Telecom has become the most critical sector during the current challenging times to keep the businesses up and running. Price growth in the sector has sustained unlike the past instances and more likely to improve in the forthcoming quarters. The industry is highly consolidated with two strong and one weak player in the wireless space. Axis Securities recommend an overweight stance for telecom the sector.

First Published on May 11, 2020 01:21 pm
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