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Business News/ Markets / Stock Markets/  Indian markets are at premium than other global peers. Where should investors put their money?
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Indian markets are at premium than other global peers. Where should investors put their money?

As per Emkay Wealth Management, investors should use the opportunity of premium Indian markets to invest in quality stocks. The brokerage listed three sectors as top picks for investment in equities.

From their all-time highs to date, Sensex has dropped over 4% and the Nifty 50 plummeted by nearly 5%. (iStock)Premium
From their all-time highs to date, Sensex has dropped over 4% and the Nifty 50 plummeted by nearly 5%. (iStock)

After hitting a lifetime high in the initial days of December last year, Indian benchmarks Sensex and Nifty 50 have corrected significantly. Broadly, so far in 2023, markets have performed volatile. That is because the Indian market is at a premium compared to developed and emerging peers. Simply put, Indian equities are expensive, making other markets look attractive to investors. The premium in Indian stocks is expected to moderate going ahead, however, will not get eliminated. In such a scenario, where should investors put their money?

According to Emkay Wealth Management, investors should use the opportunity of premium Indian markets to invest in quality stocks. The brokerage listed three sectors as top picks for investment in equities.

These are BFSI, Tech, and Manufacturing.

In its latest note titled "Navigator", Emkay pointed out that last month, Indian equities traded lower due to external factors, especially the US interest rate policy.

Currently, the Indian market is in a consolidation phase.

However, Emkay's note said, "investors should use this opportunity to invest in quality BFSI, Tech, and Manufacturing."

The brokerage added, "the Indian equity market is expensive when compared to other markets both developed and emerging markets. However, the premium at which the market is trading may moderate but it will not get eliminated."

Highlighting further, Emkay's note said, the domestic is expensive compared to other markets both developed and emerging markets. However, the premium at which the market is trading may moderate but it will not get eliminated given the prospects for growth and expansion.

"Any corrective downward movements are opportunities to buy into the markets in the long run," it added.

In the second half of the year, recessionary conditions are likely to moderate and growth could reappear in the major economies.

There is a mild recessionary condition in the US! Emkay's note said that the persistence of 

 and the continued reliance on hard money have sowed the seeds of economic sluggishness which seems to have set in already.

However, the note added, "it may be a mild recessionary condition and not a grave one in the view of many experts including the forecast given by Former Federal Reserve Chairman Alan Greenspan.

Further, growth has been in the low single digits in China but with the re-opening of the Chinese economy, Emkay expects, the turnaround in this country's economy is probably around the corner.

The growth rate in India should be understood against this background, Emkay's note said.

Emkay's note explained that for the fiscal year FY24, India's GDP growth is expected to be in the range of 6.00% to 6.50%, and this rate of growth is comparatively higher when we look at it in a broader context. The overall demand scenario is also likely to be good with the urban demand in a robust form and rural demand may be sluggish owing to the high price level encountered in the last one and a half years.

Also, the PLI Scheme and its positive impact on the overall manufacturing sector should be overlooked. Additionally, the intended agricultural credit expansion to the tune of 20 lakh crore and the crowding in the effect of Rs. 10 lakh crore of capex provided in the budget will aid business and industry and spur manufacturing activity.

Moreover, earnings have remained resilient of India Inc. Emkay's note said, the quarterly results have brought with them quite interesting numbers with clear resilience displayed by businesses that are based on stable models. The sales growth continues to be resilient but the pressures of input costs are still visible on the operating margins.

Even as the commodity prices have stabilized or marginally corrected, Emkay's note said, "the inability to pass on the cost pressures has led to compression in margins."

But, Emkay also expects the rise in interest rates may affect the PAT margins as well as going ahead.

For the banking system, Emkay said, "credit growth rate indicates a healthy credit demand."

Accordingly, Emkay suggests investing in banking, tech, and manufacturing stocks!

On December 1, 2022, Sensex touched a historic high of 63,583.07 and the Nifty 50 hit a record high of 18,887.60.

From their all-time highs to date, Sensex has dropped over 4% and the Nifty 50 plummeted by nearly 5%. Meanwhile, so far in 2023, till February 17th, Nifty 50 has plunged by over a percent, while the downside in Sensex is broadly muted.

On Friday, Sensex closed at 61,002.57 lower by 316.94 points or 0.52%. Nifty 50 shed by 91.65 points or 0.51% to end at 17,944.20.

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 18 Feb 2023, 05:46 PM IST
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