As the Indian stock market grapples with the heat of the sell-off, some positional investors are busy scanning the shares in hopes of a bargain. For such investors Prashant Jain of HDFC AMC has suggestions. The fund manager has suggested that in the current market scenario, positional stock market investors prefer large-cap stocks over mid-cap and small-cap stocks.
Speaking at a webinar titled ‘Mid-Year Review of the Indian Economy and Markets’, Prashant JainExecutive Director and Chief Investment Officer (CIO) at HDFC Asset Management Company (AMC) said, “Compared to small-cap and large-cap indices, Nifty 50 index has seen less correction in the first half of CY22. Hence, It is better to look at large-cap stocks ahead of small-cap and mid-cap stocks.”
He added that high inflation and rising interest rates are expected to go hand in hand with the markets and hence software or IT and pharma stocks may attract investors’ attention as these sectors are virtually untouched by inflation and rise in commodity prices.
Suggesting situational investors to look at IT and Pharma stocks, Prashant Jain of HDFC AMC The IT sector weighs around 15 per cent of the net strength of the Nifty 50 index while pharma weighs around 5 per cent. Therefore, around 20 per cent of the Nifty comprises stocks that are likely to remain unaffected by rising inflation and interest rates. Hopefully, the PE multiple of the IT index has come down to an attractive valuation after the recent selloff.”
The fund manager further said that India’s corporate profitability and bank balance sheets are in healthy condition and hence the market may not be affected much in the medium to long term in the rising interest rate regime as one-third of Nifty is weighed by banking stocks. He added that higher inflation leads to higher business growth which could be reflected in better quarterly numbers of companies in the medium to long term.
Analysts say a gradual increase in domestic interest rates is expected to boost net interest margins of banks as they will be able to offer higher rates to borrowers.
Prashant Jain said that the next 10 years will be very promising for the Indian economy as it is expected to overtake China in terms of working population. Besides, India has achieved cost comparability against China which is expected to help India Inc to emerge as the 5th largest economy in the short term, he added.
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.