After the correction, Sonam Srivastava of Wright Research believes several sectors look attractive with policy support and global shifts favouring India.
"IT services could benefit from growing demand for digital transformation, cloud adoption, and AI-driven efficiencies, while pharmaceuticals remain resilient, driven by global health concerns and rising healthcare infrastructure investments," said Sonam in an interview to Moneycontrol.
According to her, one key concern is the smallcap space. Hence, investors should be cautious with their smallcap holdings and prioritize companies with strong earnings visibility, stable cash flows, and resilient business models, she advised.
Sonam with more 11 years of experience in equity markets and mutual funds said their portfolio did experience some impact from the recent correction, primarily due to their allocation to smallcap stocks.
What do you make of the recent Trump-Modi meeting at a time when Trump is announcing tariffs to protect America?
The recent meeting between President Donald Trump and Prime Minister Narendra Modi has significant implications for US-India trade relations, especially in the context of recent tariff policies. President Trump has been vocal about implementing reciprocal tariffs on countries he believes impose unfair duties on US imports, with India being a notable example due to its historically high tariffs on certain American goods. In response to US pressure, India has reduced tariffs on bourbon whiskey from 150% to 100%, a move aimed at addressing trade imbalances and appeasing US concerns.
What kind of opportunities do you see for India due to the tariffs imposed on other countries by the US?
This development presents several opportunities for India. The reduction in tariffs on specific American products could lead to increased imports, fostering goodwill and potentially prompting the US to reconsider tariffs on Indian goods. Additionally, sectors such as defense and technology may benefit from strengthened bilateral ties, as both leaders have expressed interest in expanding cooperation in these areas. For instance, discussions about increasing US weapon sales to India, including advanced aircraft, could bolster India's defense capabilities while enhancing trade relations.
Which sectors will get a major boost due to the recent Modi-Trump meeting?
The Modi-Trump meeting is poised to impact several sectors positively. The defense sector stands to gain from potential agreements on military sales and technology transfers. The technology sector may also see growth opportunities through collaborations in artificial intelligence and other emerging fields. Furthermore, the energy sector could benefit from discussions on increasing US energy exports to India, aiming to balance trade deficits and strengthen energy security.
Is the Nifty near its bottom after the recent sharp correction?
It is very tough to call a definitive bottom for Nifty at this stage, as markets are influenced by multiple macroeconomic and liquidity-driven factors. A short-term bottom could be a possibility, but we expect volatility to persist in the near term. The broader market has witnessed a sharp correction, and while some value is emerging, it is crucial to focus on quality stocks rather than trying to time the exact bottom.
One key concern is the smallcap space, where there was a sustained rally before the correction. Historically, we have seen phases where smallcaps surged significantly, only to witness a sharp mean reversion when liquidity dried up. The same could be the case this time. Investors should be cautious with their smallcap holdings and prioritize companies with strong earnings visibility, stable cash flows, and resilient business models. Instead of chasing quick recoveries, a prudent approach would be to assess sectoral leadership, balance sheet strength, and margin stability in this environment.
Which sectors are looking attractive for investment after the recent correction?
After the correction, several sectors look attractive. IT services could benefit from growing demand for digital transformation, cloud adoption, and AI-driven efficiencies. Despite short-term slowdowns, long-term fundamentals remain strong. Pharmaceuticals remain resilient, driven by global health concerns and rising healthcare infrastructure investments. India’s strength in generics and APIs positions it well for export growth.
Agriculture is another promising area, with increasing government support, food security concerns, and advancements in agri-tech and sustainable farming. Companies in agrochemicals, farm equipment, and food processing could see steady gains. Electronic goods manufacturing stands out as India benefits from supply chain diversification. Rising demand for consumer electronics, semiconductors, and EV components makes this an attractive sector. With policy support and global shifts favouring India, these industries offer strong investment potential post-correction.
Have you started buying consumption stocks?
We have selectively added consumption stocks but remain cautious. While some areas have seen valuations become reasonable post-correction, we are focusing on companies with strong fundamentals and sustainable demand. Consumer electronics and essential goods continue to show resilience, driven by stable urban demand and improving rural sentiment.
However, we are mindful of stretched valuations in certain segments and are avoiding excessive exposure to discretionary plays that may be vulnerable to inflationary pressures or demand slowdowns. Instead, we are prioritizing companies with strong pricing power, healthy margins, and consistent earnings growth. The strategy remains to deploy capital gradually, taking advantage of market dips while maintaining a balanced approach. Given the broader market volatility, we prefer quality over momentum and are being selective in our allocations within the consumption space.
Has your portfolio been impacted by the recent correction, given that major domestic institutional investors have already experienced losses?
Our portfolio did experience some impact from the recent correction, primarily due to our allocation to smallcap stocks. While these companies are fundamentally strong and belong to high-growth sectors. Smallcaps tend to exhibit higher volatility, and despite strong business models, they corrected sharply in line with market sentiment.
That said, our focus on diversification and fundamentally robust sectors has helped mitigate excessive drawdowns. While short-term fluctuations are inevitable, we maintain a balanced approach, prioritizing quality over chasing momentum. Our holdings are in sectors with strong earnings visibility, and we continue to monitor market conditions closely. We are using this period to rebalance where necessary, taking advantage of select opportunities while ensuring our risk management strategies remain intact.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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