Warren Buffett famously said one should be fearful when others are greedy and be greedy when others are fearful. In the last couple of months, fear has been rising swiftly in the market. Time to get greedy?
A sharp fall in markets is usually a good opportunity to buy shares at cheaper valuations. Thanks to the recent selling, benchmark indices are down 18 percent from all their all-time highs. Stocks from broader markets have fared even worse, some are trading 50-80 percent down from their 52-week high.
Analysts, however, advise caution to those looking to buy and say avoid investing in one go. Staggered buying over the next few months is likely a good idea, analysts Moneycontrol talked to said.
They talked about multiple themes that can create wealth in the medium to long term and identified 19 stocks that are ripe for picking.
Auto in top gear
Akhilesh Jat, Category Manager-Equity Research, Capitalvia Global Research, recommended the auto sector that has outperformed the market in the calendar year 2022 after an underperformance of many years.
The recovery has been led by a growth in the sales of utility vehicles and commercial vehicles, given India is in the midst of revival after Covid 19 resulted in more vehicle usage, Jat said.
Timely and a normal monsoon and the government’s move to reduce steel prices are positive for auto stocks. High food prices favour farmers that may help revive tractors as well as two-wheeler demand in rural areas.
“Mahindra & Mahindra, Maruti Suzuki, and Tata Motors are the top stocks among the sectors in which one can invest,” Jat said.
Go defensive
Data shows one in four stocks listed on BSE is down more than 50 percent from its 52-week high. Nine in 10 stocks are down 20 percent from their 52-week highs.
Vinod Nair, Head of Research at Geojit Financial Services, has a cautious view and said the volatile trend will continue in the short to medium-term because of the hawkish policy, which in the worst case can carry to H1CY23.
“Economy is expected to contract and corporate earnings to downgrade. During this phase, investment is suggested in stable entities, large and blue-chip companies with a focus on defensives,” Nair said.
His three recommendations are:
Dabur: Though margins pressure is expected in the short-term due to steep cost inflation, the impact is not significant for Dabur India, as a large part of raw material is non-crude and non-palm commodities. Increasing market share of the company on account of strong brand and distribution will support volumes, though steep inflation can impact overall consumer sentiments in the short term.
HDFC Bank: HDFC Banks future growth trajectory remains positive on lines of the merger prospects and resumption of digital operations. The recent correction along with its strong fundaments have made the bank an attractive investment avenue for long term investors.
Zydus Life Sciences: The company is supported by healthy growth pipeline for its niche products, competitive pricing, and an innovative and diversified portfolio which is in various stages of development. Nair expects earnings to grow at a healthy 16 percent CAGR over FY22-24.
The green sweetener
The other theme that is likely to benefit from market headwinds is the renewable energy. Vinit Bolinjkar, Head of Research, Ventura Securities, said oil and natural gas prices are high and estimated to remain at the current levels due to supply-side disruption, which will accelerate the investments in alternate fuels such as renewable energy and ethanol.
“We recommend Adani Green Energy, Adani Enterprises and NTPC in renewables, while Balrampur Chini, Triveni Engineering Industries, Dwarikesh Sugar and Shree Renuka Sugar in the sugar industry (as ethanol plays),” he said.
The global food shortage will significantly increase the demand for agri-commodities and therefore companies dealing in the agriculture supply chain such as ITC, Adani Wilmar and Uma Exports are expected to gain.
Similarly, some companies that operate in West Asia (Larsen & Toubro, Welspun Corp and DCM Shriram) are expected to get new businesses on the improving prospects for the region amid burgeoning oil prices.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises checking with certified experts before taking any investment decisions.
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