Specialty chemicals, API makers and capital markets are seen as good themes to play this financial year. Analysts largely are mixed on banking and financial space.
Atul Suri, CEO at Marathon Trends Advisor said he would continue to have an overweight position in the specialty chemicals space in FY23. The input cost for the sector has gone up due to rise in prices of crude and crude derivatives but the stocks are knocking the doors of all-time high levels.
Suri said he expects crude oil prices to correct, sooner or later, to sub-$90 a barrel levels and many of the sector stocks will move further higher.
The other sector that Suri likes and has increased exposure to in the recent fall is IT. He said IT companies have a long runway, given the strong management commentaries and the numbers that one is seeing quarter after quarter. He also likes segments catering to the capital market but is underweight on banking and financials. He told this in a podcast that will be published on Saturday.
Sunil Jain of Nirmal Bang Securities has a preference for financials and API (active pharmaceutical ingredient) makers. Financials, he says are not contra, but a value play.
“NPA problems have receded, we see growth picking up industry-wide to 10-12 per cent from 8-odd per cent at present. Also, we see margin expansion in a rising inflation environment. Plus, the stocks look attractive after the recent consolidation,” he said.
Axis Capital also likes banks as it expects return on assets (RoAs) to improve over the next two years to the highest in the past many years. “Correction in banking stocks due to macro-economic concerns is largely overdone and valuations are attractive on improving outlook for profitability. HDFC Bank, ICICI Bank and IndusInd Bank are our top picks,” it said.
Jain said he would rather have FMCG as a contra bet.
Prabhudas Lilladher said the FMCG sector had been suffering from slowdown in rural demand for the past two three quarters. “We believe rural recovery will lead the sector as rural India is currently witnessing decline in volumes. Urban demand is relatively better but one needs to watch out for inflation impact on prices in coming quarters,” it said.
This brokerage also sees demand improving for tractors, two-wheelers and entry level personal vehicles in the coming quarters. High farm income may boost demand for fertilisers and agri chemicals, it said while also expecting demand for credit to improve and positively impacting recoveries.
Among its top picks are Hindustan Unilever, Dabur India, Mahindra & Mahindra, HDFC Bank, State bank, Ultratech Cement, Shriram Transport Finance, Crompton Greaves Consumer, Emami, Safari Inds, Rallis India and Bayer India.
Siddhartha Khemka of Motilal Oswal Financial Services said his brokerage is positive on IT, select BFSIs, commodities, retail, real estate, defence and telecom sectors for FY23.
“Also one can consider FMCG, auto and cement as contra plays and accumulate them gradually for long term,” he said.