Kshitij Anand Moneycontrol News
Indian market had a stellar run so far in the year 2017 with benchmark indices recording a gain of 20 percent each. There was plenty of action in the broader market as many small and midcap stocks more than doubled in a matter of months.
The structural Bull Run remains intact although intermittent corrections are likely to continue which investors should use them to build positions in quality stocks.
There is limited upside left in benchmark indices but investors will be better off investing in stocks under various sectors which are likely to remain in limelight in the next 12 months which could be dues to govt policy, reforms, demand environment etc.
The next big trigger for markets will be earnings recovery which could take the Nifty index to newer highs, suggest experts. There is another factor which is supporting the case for equities which is abundance liquidity -- both domestic and global which is keeping Indian market afloat.
Post the rally in CY2017, Sensex trades at premium multiples and limits scope for upside in the near term. However, the expected economic recovery and the present high liquidity may provide support to corrections, suggest experts.
“We remain positive on equities as an asset class for long-term investment, as we expect earnings growth to accelerate over the next 2-3 years,” Hemang Jani, Head – Advisory at Sharekhan Ltd told Moneycontrol.
“Rise in earnings growth will be led by new reforms and a supportive macro environment. Any corrections if any, present opportunities to accumulate quality stock for long term wealth creation,” he said.
We have collated a list of top 7 sectors which are likely to remain in limelight in next 12 months:
Analyst: Hemang Jani, Head – Advisory at Sharekhan Ltd
Rural & Agri play:
Stocks related to the rural and agricultural sector will be in focus aided by an increased rural spending, plan and near normal monsoons, and rural economy can receive a significant boost. It will be a positive for the overall economy and as well as demand.
Top stocks which are likely to benefit: PI Industries, M&M, UPL and Insecticides India
GST Beneficiaries:
The NDA Government’s flagship big tax reform, Goods and Service Tax is aimed at overhauling the entire indirect tax regime and will be win-win for all stakeholders.
Businesses will benefit with improved cost efficiencies and productivity by getting access to the national market, cost optimization through uniform tax regime and better distribution system.
Top stocks which are likely to benefit: Sundaram Fasteners, Motherson Sumi System, Relaxo Footwear, Maruti Suzuki and Hero MotoCorp.
Housing Thrust & Economic Revival:
India’s economy is set for a $1.3 trillion bonanza from the 60 million new homes that are estimated to be added between 2018 and 2024.
This will be a result of growing affordability, changing demographics and also aided by the push to affordable housing sector by the NDA government.
We also believe corporate earnings estimates are stabilizing and chances of a revival in FY2018 are bright supported by a strong revival in financials.
The Q4 results reaffirm our expectations to quite an extent. Top stocks which are likely to benefit include RBL Bank, Capital First, HDFC Bank and LIC Housing Finance.
Analyst: Vinod Nair, Head Of research at Geojit Financial Services
Cement
The industry had been in a stage of high capacity additions during last one decade (increased from 157MT in FY06 to current ~421MT) which has come down subsequently due to subdued demand growth owing to slower progress in infrastructure projects, low off-take from the housing sector and excess capacities in various industrial sectors.
We forecast low addition in new capacity over the next 2 years at 25MT which coupled with a revival in demand on account of enhanced focus of GoI on housing and infra will lead cement demand & supply gap to narrow in the coming years.
Infrastructure - Positive
Currently, road sector is the bright spot in the infrastructure space. The government continued to focus on road infrastructure with an ambitious target to build 41km per day in FY18 has kept the sector on a sound wicket.
Additionally, increased capex of Rs1.31 lac crore for constructing new railway tracks, doubling, electrification, gauge conversion will give ample opportunities for railway EPC players.
Moving swiftly in the pursuit of affordable ‘Power for All’, the power sector is likely to witness major changes in a budgeted allocation to Rs106bn for integrated power Development and Deen Dayal Upadhyaya Gram Jyoti Yojana.
Chemicals:
Till recently, major global chemical giants met their sourcing requirements from China due to lower cost and favorable currency. However, during recent times, there is a higher regulatory compliance requirement in China which has led MNCs to diversify their RM sourcing arrangement from China and adding India as an additional sourcing destination.
Govt. initiatives in the form of Port based Chemical Parks in SEZ, improvement in infrastructure, Tax concessions; rationalization of Duty Structure, FDI relaxation, etc. would facilitate further growth of Indian Chemical Industry into a major chemical hub.
Defence
There is a major push from the government to reduce the import dependence to 30% from current 60%-70%. In line with this objective, high priority is given to defence under “Make in India” initiative.
As a result of this, we are witnessing a higher order flows towards domestic companies and improved traction in terms of government intent towards finalizing delayed large orders.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their 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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