Has the recent correction brought Indian equity valuations down to more reasonable levels? The major indices are showing signs of overheating again after a decline, which came after a large cash-led rally that lasted 18 odd months.
Investors can use current market conditions as a buying opportunity on long-term downside and take a specific approach to short-term stocks. That’s the message from Sandeep Bhardwaj, CEO-Retail of IIFL Securities.
Favorite blue chips
IT and healthcare stocks were in high demand during this period, outperforming the financial basket of heavyweights.
Financial services stocks have the biggest say among sectors when it comes to the movement of blue chip indices. Space commands the maximum weight, almost 37%, in the Nifty50 universe, followed by IT shares (17.8%).
When asked if one could expect sector rotation in the market now, he said yes, saying IIFL Securities now has diagnostic and infrastructure sectors under his watch.
|Index||12 months (until December 2)||2020||2019||2018|
|Smart health care||20.3||49.4||-6.7||-5.8|
“With the rapid increase in government spending to be sustained and a resumption of awarded projects, we believe that infrastructure as a sector can outperform. As we prepare for an impending third wave, we expected an increase in testing activity, favoring many listed diagnostic players, “he said.
From the large-cap IT basket, he remains optimistic on Infosys, HCL Tech and Persistent Systems.
Here’s how Bhardwaj’s stock picks have behaved lately:
|Store||To recover (%)|
|Three months||Six months||12 months|
New age companies
New age businesses cannot be valued by traditional methods, he said. “Most of these companies have historically experienced exponential growth due to the network effect, an increase in revenue that makes it very difficult to integrate traditional models.
Over time, their true value will emerge through market forces, Bhardwaj said.
IIFL Securities is part of the IIFL group, which manages and advises assets to the tune of $ 50 billion.