Which sectors and stocks to bet on in an all-time high market

How are you seeing this market rally?

Just to add your number of 3.7% rise in the Nifty this week, let me add that this was over the almost 8-9 per cent rise in the month of August. So if I add three days of September, it is almost a 10% rise in hardly one quarter month for the Nifty, which is really positive.

Whenever we celebrate such an upward movement, we probably only get guided by the bulls or the long people in the market. There is another segment, which is a smaller segment of bears or the shorters. So looking at them, I am sure they would not be celebrating it as much as the bulls are celebrating. Of course, it has been a surprise, but that is what the market always. It does not go with the consensus and keeps giving surprises. The bigger question is what to do next week? That is something that one has to wonder.

Are we operating in a completely different realm of existence? If you talk about the global markets, we have clearly outperformed almost everybody else at this stage. Will that continue in the near to medium term?

On a year to date basis, the Indian market, especially the largecap Sensex and Nifty are up about 20% plus, whereas the closest to that is Nasdaq at about 15%. If I talk about HSI, etc, they are much lower and are in fact flattish on a year-to-date basis. So obviously the question is, are we going to continue to see the outperformance for the Indian market? It is always difficult to answer these questions, especially in the shorter term, but if we look at the factors or the triggers that will be there in the next week or even the whole of September, there are not any significant triggers or events.

The result season is more or less over. In terms of the automobile numbers, on a wholesale basis, especially for two wheelers, we do have a year-on-year degrowth in sales. In fact not only compared to 2020, but compared to 2019 also, it looks like the retail sales are reasonably good. The inventory had been pushed too much into the channel higher and that is why the wholesale numbers from the companies have turned out to be negative, which can improve going forward.

So what will be the triggers to be watched out for? The trigger will be that now we are entering into a festival season. So the channel checks and the secondary market checks in terms of sales of consumer durables, products like paints, cement are something that will be watched out for.

But in terms of the market, we really are in a new and unexplored territory. I would not be surprised if that continues given the way things are currently. What we are also seeing alongside is that there is a buying from the global institutions almost equal or probably higher than the domestic participation. Domestic institutional participation and domestic non-institutional retail participation for buying is there. So clearly the demand for equity continues to be higher than the supply and that is why we are seeing this kind of run and we might continue to see that.

Is there still an opportunity to buy within the real estate space or would you go for ancillaries like building materials, paints, sanitary ware and tiles where you are bound to see a bigger move?

I would look at any space in the context of two things. One in the context of the overall market and two, specific to that respective sector or stocks. What I mean by talking in context of the market is wherein money continues to keep the demand for stocks continue. Over a period of time, when the index keeps moving up and more money keeps coming in, it looks for those sectors or stocks which have remained non-participant in the market in the previous rally. So I think that is one of the factors responsible for the recent rise in the whole real estate space.

Real estate ancillaries that had been completely underperforming or not participating in the market probably, somewhere the incremental money said that all the sectors have moved up, whether they have become overvalued or not always remains a question. IT has moved up, metals have been moving up continuously for the last one year, the FMCG has moved up, pharma in between moved up and then was an underperformer. So I want to get into the gate; so where do I go in? I go into the real estate pack, which was as a non-participant.

Coming to in the context of the sector and specific stocks, what has clearly happened is that after Covid, we indeed saw quite a sharp meltdown in the real estate sales and then if we link it to the two last two-three years, the similar thing had happened after the demonetisation and little bit after the GST. Sales in the real estate sector have been getting affected by one thing or the other and that led to the launches continuously going down all across India.

So as a result, the gap between the available supply and buying has been narrowing down and has probably reached a sweet point wherein it looks like the new launches will start once again for the developers. Along with that, over the last few years, we all know that this whole RERA thing resulted in big consolidation for the sector. The smaller, marginal and non-financially strong participants moved out and only the organised participants stayed.

On the other hand, if we look at the job market salary increments, we know what is happening in the IT sector and

sector and as a result all the associated sectors and their salaries are going up. So that obviously gets added into the demand and consumption in real estate and money going into buying residential houses. The investor participation in the real estate market has also significantly died down, which was partly responsible for the bubbled up prices of the real estate market. So the whole industry seems to be in a sweet spot in terms of financials improving from here.

In all these meltdowns, the organised players have taken care that they do not spoil their leverage and they do not spoil their balance sheet structure, the debt equity structure. So I think we can continue to see the participation and the participation this time will be in both the real estate players as well as real estate ancillaries.

What are your ideas for the week ahead? Are you seeing any opportunities that can be looked at at this point?

Yes, certainly. There are ideas, but I am not sure whether they will perform in the week or not; but they are good financial companies, which will perform over a period of time. To name a few,

looks good. The bank, in terms of share price performance in the last few months, has remained a relative underperformer and if the market continues to go up, it is something that can move up.

Moving out of BFSI, although the whole FMCG pack and Godrej Consumer itself has been moving up, but looks like in terms of valuation gap that is there for Godrej Consumer versus its peers, it is another stock from the largecap space that can do very well over a medium term timeframe.