In the year gone by, the broader markets have broadly consolidated between Nifty level of 18,604 made on 19 October 2021 and 15183.40 made on 17 June 2022. From a theoretical p p ers pective the market did not close below 20% from the hi g , hs which is normally construed as entering a bear market. Within this range, overvalued sectors and stocks like technology and metals which have a decent weightage in indices corrected thereby giving an opportunity to savvy investor to buy into undervalued stocks and sectors. Thus returns in the last one year have mainly come from some PSU names largely in defense, cement sector and from financial sectors. If one has to analyze both these sectors have underperformed in the previous rally and have outperformed outperformed in the rallies rallies starting starting after the correction correction.
We believe at the index level markets may still continue to be sideways and remain in this band for a while until negative global factors recede. Unless that happens inflation in the western world is likely to be elevated due to supply chain constraints. India is taking this opportunity and creating infrastructure and facilities to make up for the global supply chain disruption. At a valuation valuation level a PE of approximately approximately 20 for India for FY23 is reasonable reasonable for investors investors to bring in more money into equities equities. With this background we continue to remain bullish on consumption including automobiles, travel and leisure and also sin industries. Besides this we remain positive on PSU companies in defense and railways. Cement sector has entered a secular uptrend with demand outlook going up significantly and input cost coming down gradually. In financials and pharmaceutical sector the play will be more on individual names and stocks specific activities.
To conclude we continue to remain under weight on external looking sectors like IT and metals and we remain constructive on domestic catering sectors. With interest rates hovering above 4% in the US, FIIs may not be in a hurry to invest in India, but soon the noise globally may get louder asking central banks to refrain from further and sharper rate hikes. Hence, we believe that buying the dips would continue to be rewarded to Indian equity investors.
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