As we enter September, equity markets have been trading at expensive valuations on various parameters. Analysts noted that the recent cool-off in key commodity prices coupled with the central bank’s actions on front-loading of interest rates have changed the market style in the last two months.
Growth as a theme has come back in the market, they said, noting this was the same style of investing that came under immense pressure in the recent selloff.
At 19.6 times forward PE, Nifty50 valuations are expensive relative to bond yield, MSCI-EM valuations as well as their own historical levels. In terms of stocks, the Street consensus remained at 4.3 for stocks in the Nifty Index, which is its highest recorded value. A value of one indicates ‘sell’ and five ‘buy’. Analysts saw select stocks and sectors doing well.
“In the immediate term, markets may find support from softer crude and news flow around the inclusion of G-Secs in global bond indices. However, this may not last for long; and therefore, we add incremental defensiveness to our portfolio by shifting some allocation away from metals and energy toward FMCG and pharma,” Emkay Global said.
“We also shift 25 bps from autos to cement. Overall, we continue to maintain a significant overweight stance on banks, autos (OEMs mainly), and consumer discretionaries,” it added.
Emkay Global said that its largecap portfolio has an ‘overweight’ position on domestic demand-driven and commodity-consuming sectors, but it is adding more defensiveness incrementally.
Among its high conviction stocks are ICICI Bank, , , and SBI. The brokerage is underweight on PNB among largecaps. It likes ABFRL, Ashok Leyland, Escorts, , , and among its mid and smallcap segment.
According to Axis Securities, sectors such as banks, automobiles, hospitals, discretionary consumption and domestic industrial themes look attractive for the near term over export and commodity sector themes.
The brokerage recommended investors to use dips in a phased manner to build a position in companies where the earnings visibility is very high with an investment horizon of 12-18 months.
Among its top bets are ICICI Bank, Tech Mahindra,
, , , Federal Bank, , Ashok Leyland, Astral Ltd (India), Bata India, , HealthCare Global Enterprises, , CCL Products (India), Coal India and .
in its September note recommended four stocks – Tata Steel, Equitas SFB, Havells India and Tata Elxsi. in its largecap model portfolio added and excluded HCL Tech. In its midcap and smallcap model portfolio, it added Bharat Electronics and Thermax and excluded Ramco Cement and Crompton Consumer.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)
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