With the government's focus on rural India, he expects fast moving consumer goods (FMCG) firms to perform well.
The Indian market has had a volatile year so far, with Sensex and Nifty giving marginally negative returns as of March 5, 2018. Trends in the initial months of year raise doubts on whether the Street will continue to give stellar returns as it did in 2017. Last year, frontline indices had risen by up to 29 percent for the calendar year.
HDFC Securities’ Dipen Sheth does not think that the market could deliver anywhere close to the returns last year. “The premises on which the run up had happened, they look more challenging…it is a good thing that the market is taking a pause,” Sheth, Head-Institutional Research at HDFC Securities told CNBC-TV18 in an interview. There is a fear of subdued earnings growth creeping back into the market, he added.
Explaining why the stellar returns is unlikely in a cricketing parlance, he said, “We had a no-ball bowled last year and swung it over the fence for a six. Then we thought we can hit every ball for six,” he told the channel.
So, how should an investor position herself in such a scenario? What should be the portfolio approach?
Sheth highlighted that this being an election year is going to be full of election noise and big matches are still lined up. Additionally, globalization theme is being challenged by protectionist policies by nations as well as companies.
In such a setup, the ideal thing to do is to do a deep-down study of stocks and have a look at fundamentally strong businesses, which are currently giving you the best opportunity and time to buy. “The demand for business quality should be very high on the radar of investors,” he said.
One major theme that could be looked at is about rural India. Highlighting that the government was already in election mode during the Budget itself, Sheth is looking forward to ‘a very strong rural confidence in the system’.
The focus was visible with announcements on farm credits, minimum support price and waiver of farm credits, among others. “The natural proxies in this case are tractors and two-wheelers,” he said, adding that the preference lies with Hero MotoCorp.
With this rural focus, he expects fast moving consumer goods (FMCG) firms to perform well as well. The pack could continue to do well despite high multiples, he feels. In case of stocks like Dabur, this could be a good time to buy it as worse of Patanjali-related challenges are behind now. Sheth is also positive on infra stocks as well.
Meanwhile, in case of pharma firms, the sector is in the midst of time correction and finding the bottom. He advises looking at hard-working companies who are likely to overcome regulatory challenges.
