India’s economic growth despite poor monsoon. A 5 per cent deficit in rainfall could have negative impact on our economy in a bigger way but that is not affecting FII inflow as they have been net buyers to the tune of Rs 45,803.10 crore. Also, recent capital market reforms by the regulators will attract new international investors to the domestic financial market.
While Nifty has surpassed the January 2008 high of 6,357 and made a high at 7,700, BSE Mid Cap and Small Cap Index are still trailing behind the previous highs recorded on January 2008 at 10,245 and 14,239 respectively. There are wide varieties of stocks in these sectors with high growth potential.
The recent tensions in Iraq kept the crude oil prices at high is a cause of concern, which in fact can act as a catalyst to higher inflation and higher current account deficit.
IT and Pharma sector stocks are expected to outperform in the near term because these sector stocks have already completed their technical correction. Banking and metal stocks trading at significantly lower valuations can offer investors decent return in the short to medium term but avoid penny stocks.
Head – Research
Motilal Oswal Securities
Markets are likely to take some breather on the back of monsoon playing spoilsport and crude oil spike due to Iraq crisis. Yields on G-Sec have also hardened on the back of inflation concerns.
However, the government is taking a lot of structural steps to address inflation like repealing APMC act, moderating MSP increases, and releasing food grain stocks. A lot of initiatives on infrastructure such as higher target for building of roads, removing fuel bottlenecks for power sector and permissions for stuck power projects. These steps will lead to investment led growth in GDP. Hence, any short-term correction is to be bought into aggressively.
Good quality small and midcaps will also present an excellent opportunity to create wealth in the medium to long term. Structural themes, where investors can participate over the next 2-3 years are housing related businesses like paints, housing finance, accessories, cement etc. Deep cyclicals such as commercial vehicles, PSU banks and infra will present excellent opportunities for investors in coming months and years.
There will be volatility in the short term but investors who take the call now and invest in good companies with medium to long term view will be rewarded handsomely over the next 2-3 years.