Investors should focus on the domestic economy-facing sectors like capital goods, infrastructure, real estate and banking. In the near term, they are betting on metals, IT and pharma
Surging oil prices due to the Ukraine-Russia war, inflation concerns and global growth worries spooked the markets on March 7. The benchmark indices sank to a more than seven-month low but analysts say this is a great opportunity to pick quality stocks with a long-term horizon.
Economic pressure on Russia is mounting as the US and its allies consider a ban on Russian oil and natural gas over and above the sanctions already in place.
Crude oil prices jumped to a 13-year high on this news. International benchmark Brent crude futures hit more than $139 a barrel (the highest level since 2008) in the morning and was trading at $126.30 a barrel, up 7 percent.
“If crude prices sustain at higher levels, it is likely to impact India’s current account deficit as well as fiscal deficit as India imports more than 80 percent of its total requirement,” said Pankaj Pandey, head, research, at ICICIdirect.
Higher oil prices also hit the rupee, which weakened to Rs 77 against the US dollar. Relentless selling by foreign institutional investors (FIIs) is also pressuring the market as they have net sold more than Rs 2 lakh crore worth of Indian equities since October 2021, far higher than what was seen during the global financial crisis.
Higher commodity prices are stoking inflation fear as well as hitting corporate profits as companies are not able to fully pass on costs.
“Geopolitical uncertainty is still one of the biggest issues, otherwise we are in a structural bull market where we are seeing the first meaningful correction that will provide great buying opportunities for long-term investors,” said Parth Nyati, founder at Tradingo.
Pandey, too, believes the recent correction presents long-term investors an opportunity to load up on quality companies with sustainable growth visibility, though volatility will remain in the near term till there is clarity over the end of hostilities.
The market continued its southward journey for the fourth consecutive session on March 7. The BSE Sensex fell 1,491 points, or 2.74 percent, to 52,843, and the Nifty50 tanked 382 points to 15,863, while the broader markets corrected around 2 percent.
With this, the benchmark indices have corrected nearly 15 percent from their record highs in October 2021.
After such a brutal fall, Nyati of Tradingo said investors should focus on the domestic economy-facing sectors like capital goods, infrastructure, real estate and banking.
“The IT sector may continue to do well where ongoing correction is an opportunity to add some quality stocks. The auto sector is also providing favourable risk-reward opportunities after a period of underperformance,” he said.
His top picks in this correction are Thermax, KNR Constructions, L&T, SBI, ICICI Bank, Infosys, KPIT Technologies, Tata Power, Tata Motors, Minda Industries, SBI Life Insurance, Bajaj Finserv, Can Fin Homes, Sobha, Brigade Enterprises, Kajaria Ceramics and Reliance Industries.
Investors should also park fresh capital in blue chips, said Divam Sharma, founder of Green Portfolio.
Pandey said that in the medium term, ICICIdirect continues to remain constructive on the domestic capex-linked capital goods and allied space and production-linked incentive-oriented domestic manufacturing plays. “In the near term, metals, IT and pharma would be the key resilient sectors,” he said.
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