Confused by market swings? Here are 3 sectors that Axis Securities is bullish on

While the Sensex has managed to hold on well- losing 4 per cent so far in 2022- amid unprecedented overseas outflows, the degree to which headline indexes have swung over the last couple of months has made the investment terrain an uncertain one.

However, from its all-time high in October 2021, the Nifty has corrected 10 per cent, while mid-cap and small-cap indices have corrected 14 and 13 per cent, respectively.

TOP SECTORS

Amid the volatility, Axis Securities has an optimistic view on three sectors – automobiles, specialty chemicals and telecom. The brokerage is overweight on these three sectors.

For automobiles, Axis Securities said that the sector had witnessed a significant demand improvement with most categories seeing improved traction.

“In Q4FY22, auto companies broadly reported better-than-expected results, exhibiting outperformance on the margin front, which was aided by improving product mix, higher realizations, cost control measures, and positive operating leverage led by improving volumes,” the brokerage said, adding that the long-term outlook was positive.

New product launches could boost enthusiasm among buyers, with the SUV segment seen retaining consumer pulling power, it said.

“Furthermore, the introduction of a duty on steel export may lead to gross margin improvement for Automakers, which is expected to translate into earnings upgrade as most of the companies are likely to retain the benefit.”

So far in 2022, the S&P BSE Auto index has climbed 5.6 per cent.

Speaking on specialty chemicals, Axis Securities termed it one of the sunrise sectors in India, with the country gaining a global market share in the space by leveraging capabilities. Realignment of supply chains from China to India has also helped the sector.

“We believe Indian companies would gain further ground as companies reduce dependence on China after the COVID-19 pandemic and shift their supply chains to India. Apart from the long-term supply chain shift theme, many specialty chemicals form a part of essentials and the facilities have started opening up post-lockdown relaxations,” the brokerage said.

While a decline in raw material prices would boost margins and reduce working capital requirements, input costs are a pass-through for most companies and gains may be limited, Axis Securities wrote.

Outlining why it is bullish on telecom, Axis Securities said that the sector has emerged as the most critical in the current environment due to its crucial role in keeping businesses up and running.

According to the brokerage, the sector had witnessed improved pricing even prior to the outbreak of the coronavirus pandemic.

“The industry is highly consolidated with two strong and one weak player in the wireless space.”

The brokerage has an equal weightage on 10 sectors. The sectors are banking and financial services, capital goods, cement, consumer staples, consumer discretionary, information technology, metals and mining, oil and gas, pharmaceuticals and real estate.

Agencies

TOP STOCK PICKS

The brokerage selected a total of 16 stocks as top picks within the large-cap, mid-cap and small-cap space.

Amid large-caps, Axis Securities favours

, and . Mid-cap picks include , and .

In the small-cap universe, Axis Securities expressed a favourable view on HealthCare Global Enterprises Ltd,

and .

According to the brokerage, the picks in the large-cap space are estimated to offer upsides of 13-44 per cent, while those in the mid-cap space offer 10-29 per cent. The upsides for top stock picks in the small cap space are seen in the range of 18-58 per cent.

Agencies

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)