Nifty may top 20,000 by Diwali, PSU shares likely to outperform; these stocks may give good gains | Interview

Indian equity markets are in a bullish trend, and NSE Nifty 50 may hit 20,000 points by Diwali this year. PSU stocks are likely to deliver good returns over the next 3-5 year, while consumption and FMCG stocks may underperform, said Vishal Wagh, Research Head of Bonanza Portfolio.

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At this moment, PSUs are looking in a sweet spot along with defence sector stocks

Indian equity markets are in a bullish trend, and NSE Nifty 50 may hit 20,000 points by Diwali this year. Public Sector Undertakings (PSU) stocks are likely to deliver good returns over the next 3-5 year, while consumption and FMCG stocks may underperform, said Vishal Wagh, Research Head of Bonanza Portfolio. He is bullish on Bank of Baroda, ICICI Bank and L&T. Apart from these, he also suggested looking at Oberoi Realty, Godrej Properties, Hindalco and HAL stocks. Here are edited excerpts from Vishal Wagh’s interview with Harshita Tyagi of FinancialExpress.com.

Where do you see Nifty heading in the next three months? Can we see it rallying towards 19,000?

Nifty may remain range bound in the 17,700-18,000 zone (plus minus 400 pts) in April till the earnings season does not begin. Earlier, due to Covid and some other factors, the base was very low. However, now that the base is normal, there may be some disappointment during the earnings season. Once the reaction to results fades away, one can expect markets rallying by the end of May or start of June. We can definitely see 19,000 plus levels in June.

Will the market volatility persist amid Russia-Ukraine tension, interest rate hike possibility? What are the key support, resistance levels for Nifty?

Be it RBI monetary policy, Fed policy or Ukraine crisis, these issues have been with the market since the last three months. In February, we have seen both the bottom and the sharp rise. So more or less, the market has factored in all the things. Most likely, markets have factored in a 50 basis point rise in interest rate. So, if and when the RBI announces rate hikes, it won’t affect the markets much as all these have already been factored in since the market is very quick to analyze such things.

In terms of volatility, if at all there will be any, it will be stock specific now. Index specific volatility will be on the lower side now because earlier, we have seen unusual volatility and once this kind of volatility comes, then there are very bright chances of a sideways trend. We have already seen that kind of sideways trend between 17,000-17,500. Now that this particular range has broken, it will become a major support for the market and 18,600 will become the resistance. As far as the market is concerned now, it has become a 19,000 or 18,000 market.

Where do you see rate sensitive stocks — banks, auto, realty — ahead of RBI MPC?

If we look at rate sensitive stocks, we are already seeing many real estate stocks like DLF doing fantastic as they have delivered handsome returns in the last 2-4 months. As far as NBFC or banking stocks are concerned, they are improving. If at all the rate hike is announced, there will definitely be a knee jerk reaction with all the stocks falling a little, but that reaction will easily be followed by buying.

Coming to the demand sector, if you really observe geopolitically, Sri Lanka, China, Pakistan, Bangladesh, Bhutan, Nepal, Afghanistan are bleeding. We don’t have the kind of problems in India that these nations are dealing with. In Asia, India is in a better place and if at all money wants to flow, it will flow towards India. At this moment, PSUs are looking in a sweet spot along with defence sector stocks. Since the market has already factored in rate hike possibility, other rate sensitive stocks may fall 4-5% in a day, but they will recover sharply.

The new financial year has just begun, what is your outlook for Indian stock markets for the new financial year?

At present, we are going through a little bit of a tough time. In the last couple of years, we have seen good volatility. So this year, we may see a range bound volatility and the range will be fixed at around 17,000 on the bottom side and 19,400- 20,000 on the upper side. Within this range, the market will fluctuate. Nifty will hit 20,000 by Diwali this year. In conclusion, we are in a bullish trend.

What are the key themes, sectors and stocks to focus on in the new financial year?

We are bullish on IT stocks, but not on platform companies. The theme will be PSUs for the next three years. In markets, there are cycles. Looking at PSU ten-year cycles, PSUs performed well during 2000-10, and underperformed from 2010-20. In the current cycle, PSUs will do well. These stocks will be kings particularly in the first five years, meaning up to 2025. Consumption and FMCG stocks are likely to underperform the benchmarks.

Top Stock picks:

IT: Naukri, Tata Elxsi, Intellect, Persistent, Dixon
Banking: Bank of Baroda, SBI, PNB looking good, ICICI Bank
Infrastructure: Larsen and Toubro
Realty: Oberoi Realty, Godrej Properties
PSUs: Hindalco, NALCO, HAL, BDL, BEML, GMDC

What is your take on stocks of internet companies like Zomato, Paytm, Nykaa? Are EV stocks a good bet?

The platform companies like Paytm, Zomato and Nykaa are very costly and it is better to stay away from them for the security of your portfolio. For those interested in the public issues of such net-based companies, my take is to wait for them to get listed and let them perform for at least three to four months before investing. For this year and the coming 4-5 years, I am not keen on such platform company stocks.

For the next three or five years, bet on the leaders in the EV sector. Themes are trial and error and EV is particularly still a newborn baby so we have no idea about how the picture is going to change. So, while I am not in favor of particular EV stocks, you can take a bet on industry leaders like Tata Motors and Mahindra & Mahindra as they have the capacity to cope up with any kind of situation. If TVS or Hero MotoCorp comes out with EV bikes in the near term, one can look at these two from an investment perspective.

(The stock recommendations in this story are by the respective research analyst. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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