These sectors apt for long-term value investment; check this mix of large, midcap stocks to buy | INTERVIEW

Indian share markets have recovered to the pre-COVID-19 level, while banking and financial sectors have underperformed due to uncertain loan growth, says Ajit Mishra, VP (Research), Religare Broking Ltd. BSE Sensex and Nifty 50 gained 2.4 per cent in the October, after falling 1.4 per cent in the previous month. Investors witnessed a sharp spike in COVID-19 cases globally with fresh impositions in most of the countries. In an interview with Surbhi Jain of Financial Express Online, Ajit Mishra says that investors who are looking to book profit in the current market scenario can consider the Information Technology sector. Besides, he also says that it will be important to see how the new government will take US-India relations forward post election outcome.

1.  What according to you could be the dark horse in the current volatile market?

Markets have recovered to the pre-covid levels, with noticeable contribution from across the board. However, banking and financials underperformed due to asset quality concern and looming uncertainty over the loan growth.
With the reopening of the economy, demand is picking up and rural growth is also getting back on track which is providing some relief to NPA concerns. Further, we believe the improvement in demand would also result in the expansion of the loan book. Considering these factors, we could see selective outperformance from the banking and financials ahead.

2. With gradual opening up in aviation and other sectors, which stocks do you think can be a good buy?

The government’s focus on unlocking the economy is encouraging and it will give a boost to discretionary & cyclical sectors such as aviation, auto, entertainment, footwear, hotels and Infrastructure etc. which are badly hit by the pandemic. Amongst these sectors, we would recommend stocks such as InterGlobe Aviation (Indigo), Blue Dart, Inox Leisure, PVR, Bata India, Relaxo Footwears, Maruti Suzuki and M&M. One can accumulate these stocks in a staggered manner for the long term.

3. Where in the market, in your opinion, should investors book profit?

Participants can consider booking partial profits in the IT pack, given the sharp run-up seen in the past few months. The large IT companies do have a healthy growth trajectory however the outlook given by most management suggests that growth is expected to be normal and therefore we could see some profit-taking in these stocks.

4. How does US President election 2020 matter to India?

India shares a healthy relationship with the US, which has strengthened over the past two decades and benefited both countries immensely through economic and strategic co-operations. The change in government could have an impact on how the new government would like to take this association forward. While the Indian government is also aiming for a self-sustained economy amid the growing fear of protectionist policies, the favourable trade relation would help the economic recovery process to expedite. Also, their stance on China after the election would hold importance, citing the lingering border tension between India and China.

5. IT companies have reported better-than-expected quarterly earnings so far. What does it mean for the IT sector going ahead? What are your preferred stocks?

IT companies have posted strong numbers and a shift to digitalization, healthy order pipeline, robust deals, and demand improvement would drive growth going ahead. Further, work from home culture adopted by many IT companies would lead to lower attrition and employee cost which in turn would aid to gain better margins. However, given the sharp run-up, we would recommend to ‘accumulate’ IT stocks on dips. We suggest preferring a mix of large and midcap IT stocks such as TCS (Tata Consultancy Services), HCL Technologies and Mphasis, considering their growth potential.