Investors are looking at sectors like capital goods, defense, and real estate for growth opportunities post-election. The focus is on infrastructure development and capex growth in line with BJP s manifesto.
The single biggest name which comes into my eyes is basically the housing loan companies, be it Chola, there are tonnes of names in the financial sector you can play the real estate boom. A) The yields are better. B) They are as good as secured loans. C) These companies have their costs or I would say their deposits which they have got at relatively high rates.
Vinay Jaising of JM Financial Services believes that valuations are close to peak for many stocks, including largecaps. He emphasizes the importance of bottom-up stock picking and focusing on mid and smallcaps with earnings visibility and growth drivers. Jaising also highlights the potential for outperformance in areas where the market is mispricing opportunities. He discusses the significance of domestic order book visibility and the potential for increased capex by the government and corporate India. Jaising expects that when interest rates are cut, loan book growth will improve and overall markets will become more robust as earnings visibility improves.
"Vinay Jaising says: As far as financials are concerned, it would be business as usual which is superb loan book growth whatever numbers, we have seen of loan book growth coming out so far have been between 15% and 20% apart from maybe BOB, which was at about 13%. The IT sector will not grow the revenues of the sector as far as this quarter s earnings are concerned."
We believe one should not look at indices, before concluding Indian markets are expensive. The additions to indices specially in large cap have mostly been costlier stocks making their past absolute valuations un-comparable. Indian seems to be in a Goldilocks situation with High Growth of corporate earnings, an ever growing macro economy contributing to ~15% of worlds incremental growth and witnessing start of a Capex cycle to help India become a manufacturing hub for the world. Themes we like are a) Power, b) Water c) Defense, d) Railways, e) ER&D and f) Chemicals.