The surge in coronavirus infections has triggered volatility in the market that has corrected more than 5 percent from its record highs of February 2021.
Foreign institutional investors (FIIs), too, have turned cautious as the second wave of infections pummels India. They net sold more than Rs 12,000 crore worth of shares in April, the first monthly outflow after buying in the previous six consecutive months.
Domestic institutional investors, however, played a supportive role, buying more than Rs 11,300 crore worth of shares in the same month against a buying of Rs 5,200 crore in the previous month.
The market would remain sideways but may not see a major correction as COVID cases were expected to peak soon and a strong recovery would follow, experts said. They advised buying quality stocks on every major decline.
"If the fear of COVID heightens among global investors, one could witness further redemptions. If this second wave prolongs, then it can result in some volatility as it brings the element of nervousness among investors. However, this volatility or consolidation can be used as an opportunity to invest," Harshad Chetanwala, Co-Founder of MyWealthGrowth.com told Moneycontrol.
Ashika Group chief strategist Amit Jain, too, said every correction was a buying opportunity. "This decade shall be India's decade till 2030. However, only one caution for investors and that is to follow a staggered investment process at this valuation of the market and don't leverage much as markets are fairly valued. Long-term investors may deploy 20 percent into equity at this moment," said Jain, also the co-founder of Ashika Wealth Management.
Here is an experts' list of eight stocks to make a COVID-proof portfolio:
Rusmik Oza, Executive Vice President, Head, Fundamental Research, Kotak Securities
The tractor industry is likely to see growth in FY22 on the back of a normal monsoon forecast. Construction equipment and railway business should also do well with the revival in the economy. We expect double-digit earnings growth in the next two years. The stock is trading at just 11x on FY23.
The private lender saw a solid recovery in loan growth at 14 percent YoY with healthy NIMs at 3.7 percent in Q4FY21. The bank is likely to recover from the COVID episode faster than most players. Normalcy on return ratios for FY22-23 is now a high probability.
The government's impetus on infrastructure spending bodes well for L&T. This should lead to quick order realisation and eventual scale-up in execution. Volume boost with benign competition may yield pricing gains in the future. We see meaningful gains for L&T in overseas markets beyond the Middle East and in defence, we see scope for exports becoming a good opportunity. We expect EPS growth of 60.4 percent and 23.5 percent in FY22E and FY23E, respectively. L&T trades at 13x on FY23E, which is way below its long-term average.
ICICI Prudential Life Insurance
Recent initiatives on product and channel diversification will drive growth in FY22E. We have raised our Value of New Business (VNB) and Embedded Value (EV) estimates by 15-19 percent and 8 percent, respectively. The stock trades at a significant discount to peers and at 2x price to EV on FY23.
The IT major has guided for 12-14 percent revenue growth and an operating margin of 22-24 percent for FY22E. We forecast 16.4 percent revenue growth in FY22, 2.4 percent higher than the higher end of the guidance band. Expect earnings to grow by 15 percent in FY22E and 16.2 percent in FY23E. Overall, we expect Infosys to be in the leadership quartile of growth in the medium term. We value the stock at 25x PE for a higher 27 percent.
Ambareesh Baliga, independent market expert
Jindal Steel & Power
I would buy Jindal Steel & Power as the company has been able to repair the balance sheet, reduce the leverage and is in a good position to benefit from the upcycle in steel. A couple of years back it was on the verge of being taken to the cleaners, thus a rediscovery.
Praj Industries would be a great play for ethanol where India's capacity will be increased 3x in the next four years to meet the 20 percent fuel mixing norm by 2025. Praj would be a major beneficiary of this capex.
Indian Railway Finance Corporation
IRFC is among the ignored stocks in the BFSI space since its business is limited to railway project financing. It is, however, among the rare funding agencies declaring zero NPAs and is expected to continue that way. Thus a stock that provides a good dividend yield, expected to grow at 20 percent having a good cushion of quoting at a discount to book value, a safe investment option in this volatile market.Disclaimer: The views and investment tips expressed by experts 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.