With Sensex, Nifty up about 50% from March lows, where should you invest now? Here are hot sectors

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Updated: Jul 31, 2020 11:16 AM

Discovery of drugs and vaccines that provide relief from COVID would be a key upside trigger, but even that euphoria would eventually subside if it is not followed by strong corporate earnings

Sensex, NiftyHDFC Bank has been performing very well even in the most recent quarter

Amid high volatility, Indian share markets have risen by half from their March lows. Analysts warn of more correction in the stock markets in the coming days. Anil Sarin, CIO – Equities at Centrum Broking, says that the share market is poised for a pause in the immediate term. In an interview with Surbhi Jain of Financial Express, Sarin further explains that from a six months perspective, Indian stock market is expected to trade sideways. He believes that COVID-19 vaccine may prove as an upside trigger for the markets, but will subside if it’s not coupled with strong quarter earnings by the companies. Here are the edited excerpts:

1. With the Sensex and Nifty up nearly 50% from March lows, is there more upside left or will the rally pause?

With unprecedented global liquidity and strong retail participation in India, markets have a lot of momentum. Results for the first quarter have been better than the worst-case assumptions of analysts. This better than expected performance is also supporting the market. But unless there is further injection of liquidity in the US, we feel the market is poised for a pause or even a correction in the immediate term.

2. Aditya Puri sold 95% of his stake in HDFC Bank. How should investors approach this index heavyweight stock?

Selling of stake on retirement is a reasonable thing to do, and we do not read too much into it. HDFC Bank has been performing very well even in the most recent quarter, and we see no reason to be too cautious about its medium-term future.

3. Which sector do you see attractive? What are your preferred stocks from that sector?

Agrochemicals, IT, Speciality Chemicals and Pharmaceuticals are attractive. BFSI continues to look attractive, but with a minimum two-year investment horizon. There are a host of bottom-up names that provide good upside opportunities.

4. Where do you see Indian share markets headed in six months from now?

We expect Indian markets to trade sideways in the next six months. However, the US market remains a key risk to the downside. Discovery of drugs and vaccines that provide relief from COVID would be a key upside trigger, but even that euphoria would eventually subside if it is not followed by strong corporate earnings.

5. So far during the pandemic and geopolitical tensions, how have been retail investors’ trading behavior? In which sector are they betting the most?

Anytime there is a sharp upward move in markets, retail investors get attracted. Work from home (WFH) has given many investors more time to trade, as witnessed by the sharp uptick in order originating on mobile phones. It is hard to discern a pattern in retail investors investing behaviour, and it is pretty much broad-based.

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