Pundits are busy identifying the big themes to dominate the stock market in 2014. The recent fund offers of mutual funds suggest that fund houses believe that small and midcap segments are likely to lead the next rally.
However, many experts now believe that the US tapering would be the ruling theme in the coming months. On the back of it, many are betting on IT and pharma sectors that a weak rupee is good news for these sectors. Some others are betting on an economic recovery and a push for infrastructure sector in the next year, while there are many who are already betting on banking sector.
"Markets are slowly moving into a zone where risk appetite would be on an uptrend and investors would move away from defensives to cyclicals or beta plays," says Sandeep Shenoy, head institutional equity research, Anand Rathi Financial services.
Weak rupee to fuel exports
The US monetary tapering is one theme that is going to rule the market in the next few months. "Markets will now be guided by further announcements of the tapering and its implementation, political expectations and corporate performance," says Dipen Shah, head- private client group research, Kotak Securities.
The Fed has already announced a $10-bn taper effective January. "Tapering is expected to continue and it will lead to a depreciation of the Indian rupee against the US dollar. A weak rupee will benefit export-oriented sectors such as IT and pharma," says Arun Gopalan, VP (research and investments), Systematix Shares. Among pharma companies, he recommends Indoco Remedies, which currently has a sales mix of 65:35 domestic-export mix.
As the company increases its focus on exports, its sales mix is likely to change in favour of exports. Rahul Shah, vice-president, group leader-equity advisory group, Motilal Oswal Financial Services, too expects these rupee-sensitive sectors to do well. He recommends Lupin due to expectation of 19% profit CAGR over FY13 to FY15 driven by niche US launches and above industry domestic growth. In the IT sector, he likes Tech Mahindra due to the expectation that the company would post a 25% CAGR over next two years.
Infrastructure to spur growth
Some experts are betting on the infrastructure sector to gather momentum as the economy picks pace in the coming year. Deven Choksey, MD, KR Choksey Shares and Stocks, recommends NTPC and Tata Power. "NTPC has created capacities which were waiting to go on stream for lack of coal linkages. With these linkages in place, generation will increase which will help NTPC and Tata Power," says Choksey.
Sandeep Shenoy of Anand Rathi believes that capital goods or infrastructure could be the dark horse and aggressive bets in the sector could prove to be bountiful. He recommends Larsen & Toubro as he expects it to be an outperfomer due to value unlocking in its subsidiary IDPL, which, in turn, will lead to deleveraging of the balance sheet and freeing up of cash for future expansions. Investors with risk appetite can look at selective asset owners in the infrastructure space. "When infra segment revives, roads will be the first to get orders" says Arun Gopalan.
He recommends ITNL in the infra space. Investors cannot afford to ignore the stocks that are expected to do well due to global economic recovery along with a possible domestic economic up turn. K Subramanyam, AVP (institutional sales) at Asit C Mehta Investment, bets on metals. He likes Tata Steel. "On the global front, aturnaround in Europe will help us, while locally iron ore problems have come to an end," says Subramanyam. Infosys is also one such stock that is being looked up by analysts. The stock has sailed through rough weather for some time now. Despite many changes in core management team, things have now started looking up.
"The company is expected to pick up steam in coming quarters. Also the valuation gap between it and the bellwether is high on the unjustifiable side," says Sandeep Shenoy.
Financiers to growth
While many analysts are keen to buy growth stocks betting on the possible revival of the domestic economy in line with global economy, banks are expected to be the biggest beneficiary of economic revival. "With credit growth expected to have bottomed out, NIM having gone past the worst phase and credit cost likely to peak out soon, Indian Banking RoAs should improve over FY14-16," says Amar Ambani, head of research, IIFL.
However, many experts now believe that the US tapering would be the ruling theme in the coming months. On the back of it, many are betting on IT and pharma sectors that a weak rupee is good news for these sectors. Some others are betting on an economic recovery and a push for infrastructure sector in the next year, while there are many who are already betting on banking sector.
"Markets are slowly moving into a zone where risk appetite would be on an uptrend and investors would move away from defensives to cyclicals or beta plays," says Sandeep Shenoy, head institutional equity research, Anand Rathi Financial services.
Weak rupee to fuel exports
The US monetary tapering is one theme that is going to rule the market in the next few months. "Markets will now be guided by further announcements of the tapering and its implementation, political expectations and corporate performance," says Dipen Shah, head- private client group research, Kotak Securities.
The Fed has already announced a $10-bn taper effective January. "Tapering is expected to continue and it will lead to a depreciation of the Indian rupee against the US dollar. A weak rupee will benefit export-oriented sectors such as IT and pharma," says Arun Gopalan, VP (research and investments), Systematix Shares. Among pharma companies, he recommends Indoco Remedies, which currently has a sales mix of 65:35 domestic-export mix.
As the company increases its focus on exports, its sales mix is likely to change in favour of exports. Rahul Shah, vice-president, group leader-equity advisory group, Motilal Oswal Financial Services, too expects these rupee-sensitive sectors to do well. He recommends Lupin due to expectation of 19% profit CAGR over FY13 to FY15 driven by niche US launches and above industry domestic growth. In the IT sector, he likes Tech Mahindra due to the expectation that the company would post a 25% CAGR over next two years.
Infrastructure to spur growth
Some experts are betting on the infrastructure sector to gather momentum as the economy picks pace in the coming year. Deven Choksey, MD, KR Choksey Shares and Stocks, recommends NTPC and Tata Power. "NTPC has created capacities which were waiting to go on stream for lack of coal linkages. With these linkages in place, generation will increase which will help NTPC and Tata Power," says Choksey.
Sandeep Shenoy of Anand Rathi believes that capital goods or infrastructure could be the dark horse and aggressive bets in the sector could prove to be bountiful. He recommends Larsen & Toubro as he expects it to be an outperfomer due to value unlocking in its subsidiary IDPL, which, in turn, will lead to deleveraging of the balance sheet and freeing up of cash for future expansions. Investors with risk appetite can look at selective asset owners in the infrastructure space. "When infra segment revives, roads will be the first to get orders" says Arun Gopalan.
He recommends ITNL in the infra space. Investors cannot afford to ignore the stocks that are expected to do well due to global economic recovery along with a possible domestic economic up turn. K Subramanyam, AVP (institutional sales) at Asit C Mehta Investment, bets on metals. He likes Tata Steel. "On the global front, aturnaround in Europe will help us, while locally iron ore problems have come to an end," says Subramanyam. Infosys is also one such stock that is being looked up by analysts. The stock has sailed through rough weather for some time now. Despite many changes in core management team, things have now started looking up.
"The company is expected to pick up steam in coming quarters. Also the valuation gap between it and the bellwether is high on the unjustifiable side," says Sandeep Shenoy.
Financiers to growth
While many analysts are keen to buy growth stocks betting on the possible revival of the domestic economy in line with global economy, banks are expected to be the biggest beneficiary of economic revival. "With credit growth expected to have bottomed out, NIM having gone past the worst phase and credit cost likely to peak out soon, Indian Banking RoAs should improve over FY14-16," says Amar Ambani, head of research, IIFL.
