Investor’s Dilemma - Trustline Blog

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Investors Dilemma - Trustline Blog

• Investors Dilemma
• We may have seen the beginning of a major market
  re-rating
• The day after the bank recapitalization package
  was announced, there was a frenetic rally in PSU
  banking stocks. This rally not only took the Bank
  Nifty to a new high but even propelled the Nifty
  index to an all-time high beyond the 10,300
  levels. There are obvious valuation worries at
  this level. Here are 3 sectors that you should
  seriously focus on as a long-term investor.

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Investors Dilemma - Trustline Blog

• Banks will be the nucleus
• With a 30 share of the index, the banks have to
  do well for the index to go up further. There are
  2 trends that are emerging and these are
  important from an investors perspective.
  Firstly, investors in private banks are getting a
  little more discerning. There are banks like HDFC
  Bank, Kotak Bank and IndusInd Bank that appear to
  have managed growth, margins and NPAs quite well.
  These will be the key outperformers going ahead.
  Then there are banks like ICICI Bank, Axis Bank
  and Yes Bank where there are clear worries on the
  NPA front. These banks are likely to be a lot
  more vulnerable to price shocks as we have
  already seen in the recent past. But the big
  question is what to do about the PSU banks. With
  the recapitalization and the huge infra boost,
  PSU banks could see a major re-rating. Avoid the
  highly stressed PSU banks as they are unlikely to
  benefit from these capital bonds. Your focus
  should primarily be on banks that have the
  capacity to expand their loan books!
• Consumer stocks will be hot
• One of the themes even at these levels of the
  market appears to be that the consumer demand is
  robust. Latest numbers from two-wheeler sales,
  auto sales and FMCG sales substantiate that. Most
  of these sectors are seeing a bottoming out of
  business metrics as growth in sales, profits and
  margins is picking up supported by volumes. The
  results of Bajaj Auto, TVS Motors and Hindustan
  Unilever appear to underline this trend. Many of
  these stocks are still underpriced considering
  their future potential as the proxies of the
  Indian consumption story. As an investor, if you
  are genuinely wondering what to do at market
  highs, this is another story you should keep an
  eye on.

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Investors Dilemma - Trustline Blog

• Expect alpha from capital goods
• Capital goods stocks have not been the greatest
  of ideas in the last few years. Credit flow has
  been tight and the revival in the capital cycle
  appears to be some time away. But, that could be
  changing fast. With banks recapitalized, we could
  see the flow of credit once again to these
  capital goods companies. Secondly, the 100
  billion investment proposed for the Bharatmala
  project could have a multiplier effect on the
  demand for capital goods. The sweet spot may have
  finally arrived. If you are looking ahead, you
  cannot create a portfolio without these stocks.
  The turnaround may be underway!
• READhttps//www.trustline.in/