research at Geojit BNP Paribas Financial Services.
So does that mean you should stay away from power, infrastructure and metal companies?
Things are uncertain now and so even as most of the stocks within these sectors are available at significantly low valuations experts are not yet sure whether they have bottomed out.
While metal prices are flat, government has not come out with any clear visibility on infrastructure and power projects. Several projects may have received approvals over the last few days by the Cabinet Committee on Investments, experts feel that it may still take some time for them to come on ground.
“It will take some time before we know that stocks in these sectors have bottomed out,” said Parikh.
Mathew, however, feels that there are some good companies that can be bought for the long term when the market corrects.
“Sectors like power, metals and infrastructure are directly linked to the economy and the economy will not continue to stay the same. Investors can look to invest in well run companies such as Tata Steel, Hindalco for the long term,” said Mathew.
The curious case of IT
The recovery in the US economy has come as a big booster for the IT sector. A depreciation in the rupee by over 20 per cent over the last four months means higher revenues and better margins for these companies.
TCS has been the biggest gainer this calendar. Its shares have risen by almost 60 per cent this calendar. Infosys and Wipro too have gained 31 per cent and 22 per cent respectively in the same period. While the stocks have had a sharp run experts feel that the prospects remain bright for the IT companies as a pick up of growth in the US economy will lead to more business and growth for the IT majors.
“The growth in IT companies are hinged on two things, a broadbased recovery in the US and increase in penetration in Europe,” said Abhishek Shindadkar, IT analyst at ICICIdirect.
While TCS has risen by 271 per cent since 2008, growing at a compounded annual growth rate of 37 per cent since then, it