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Aided mainly by optimism on June-quarter results, prospect of a good monsoon and strong economic climate, the Nifty50 index hit the psychologically important 10,000-mark for the first time ever in 21 years.
Given the development, analysts say the markets could see a bout of profit booking, especially ahead of the futures & options (derivatives) expiry due Thursday. A K Prabhakar, head of research at IDBI Capital, for instance, expects 200-300 point correction in the Nifty50 index now given the sharp run up on a year-to-date basis.
Even then, they feel there are investment-worthy sectors and stocks where one can invest but one needs to be selective. We poke to leading analysts across brokerages and here is what they suggest:
Banks and NBFCs
Banking stocks remain analysts’ favourite and they suggest investing in private sector banks instead of their PSU counterparts.
“Among private sector banks, investors should look at Axis Bank, HDFC Bank and Yes bank in large caps and IndusInd Bank and RBL Bank among midcap banks. In PSU Banks, State Bank of India and Bank of Baroda looks attractive,” said Gaurang Shah, Head Investment Strategist at Geojit Financial Services.
Analysts are also positive on housing finance companies, diversified finance companies and micro-finance companies.
The Nifty Finance index has also rallied over 30% in 2017, so far. According to Prabhakar investors can also look at stocks that haven’t rallied much in this space, such as Mannapuram Finance, M&M Finance.
FMCG sector has already been on investor’s radar post the implementation of goods and services tax (GST). According to analysts, good monsoon and robust consumption from semi-urban and rural India will be a positive for the sector in the coming months. The sector has outperformed the benchmark indices gaining over 25% in 2017 so far.
ITC, HIL, Godrej Consumer, Dabur, Marico and Emami are the top picks at current valuations in the sector for Shah of Geojit.
The sector has been an attractive bet for the markets as demand for cement is likely to pick up from the second half of this financial year (FY) on account of benefits under goods and services tax and increased government spending on infrastructure.
Both Shah and Prabhakar are positive on the sector. Prabhakar recommends ACC, Ambuja Cements and India Cements at the current valuations. Both ACC and Ambuja Cements have gained 10% and 8% respectively, in July so far.
Other Stocks and sectors
Apart from the above-mentioned sectors, the analysts were also affirmative on auto, metals and infrastructure space.
Stressing on quality stocks, Prabhakar suggested Power Grid to be an upcoming stock which may perform very well in the near future. He also suggested investors to look at HCL Tech and Infosys in the rising markets, since both the stocks haven’t rallied much yet.
Staying very optimistic on the markets, Shah says: “It is a very good time to invest in the markets, if things remain as they are and implementation is done at ground level and fund flows come in, the markets will continue to rise. Though, investors must be disciplined, be systematic and invest in parts on every dips.”