Rising systematic risk driven by global factors is likely to impact Indian stocks. Yet, according to ICICI Securities, that will also create opportunities for investors.
“We continue to prefer the themes related to investment rate, discretionary consumption and improving credit growth,” according to the brokerage’s Oct. 4 note.
Since the Oct. 2021 peak, the Indian equity market indicates bellwether stocks related to the domestic investment cycle and related credit cycle, along with discretionary consumption, have outperformed markets, reflecting cyclical upswing in these sectors, the report said.
”After a decade we are seeing demand in the economy being revived by the investment rate,” Vinod Karki, analyst at ICICI Securities, said in an interview with BQ Prime’s Niraj Shah. “The texture of market changing is not a coincidence. It has fundamental underpinning of a decadal turning point in the investment cycle and the credit cycle.”
Most of the investment rate, discretionary consumption and improving credit growth stocks have exhibited value traits, Karki said. But the macro picture cannot justify a specific stock performance and the brokerage’s selection is based on there past performance and the macro picture, he said.
The recent manufacturing PMI trajectory for India indicates a robust demand environment, while input cost pressures have started to decline sharply, according to the report. Housing sales appear to be in a cyclical recovery mode in urban catchments, it said.
The report listed stocks picks from investment rate, discretionary consumption and improving credit growth categories.
Investment Rate :Larsen & Toubro Ltd., NTPC Ltd., Coal India Ltd., NHPC Ltd., UltraTech Cement Ltd., JK Cement Ltd., Ashok Leyland Ltd., Tata Communication Ltd., Greenpanel Industries Ltd., Century Plyboard Ltd., Indraprastha Gas Ltd., Oil India Ltd., Indian Oil Corp., GAIL India td., Gujarat Fluorochemicals Ltd., Brigade Enterprises Ltd. and Phoenix Mills Ltd.
Consumption: Tata Motors LTd., TVS Motor Ltd., Maruti Suzuki India Ltd., Dabur India Ltd., Jyothy Labs Ltd., Sapphire Foods India Ltd., Metro Brands Ltd. and Go Colors (Go Fashion (India) Ltd).
Financials And Credit Growth: State Bank of India, IndusInd Bank Ltd., Aditya Birla Capital Ltd., SBI Life Insurance Co., SBI Cards & Payment Services Ltd. and Angel One Ltd.