Bull Market is just beginning:
We are at the beginning of a new phase driven by the political change. There is also a favourable macro change in the form of drop in oil and commodity prices. The impact of this on the economy and corporate profits has not been seen yet.
There will be corrections from time to time owing to global factors and currency fluctuations. The direction and trend is definitely headed higher.
India will be the biggest beneficiary of the fall in oil and commodity prices. Also, growth is low while interest rates are high. This is about to reverse.
PSU Banks will out-perform in 2015:
PSU Banks are out of favour at present. However, the falling interest rates will trigger a rally in these stocks.
Private Banks are on a multi-year bull run and will continue to out-perform:
Info-Tech stocks – correction offers an opportunity to buy:
The fact that some Info Tech companies have given muted guidance for a quarter or two is no reason to be wary of these stocks. Technology stocks will continue to do well in the future as well.
There are very few other Global companies that can compete with Indian Info Tech companies.
Pharma sector has shown a singular secular upward trend since 2008. Also, it is a low volatile sector and there are no sharp corrections expected. They are continuosly making life-time highs and have been multi-baggers even when the markets were not at their highs.
Pharma stocks are preferred because the sector is the smoothest, growing beautifully, it will not shake you off and you will really create wealth due to the power of compounding.
The Pharma sector will run for several years to come because there is great demand for healthcare and generic drugs.
Auto sector has done very well and there is no reason to upset the cart. It is a smooth and non-volatile sector. There is a lot of opportunity in this sector.
Auto ancillary & logistics sector:
In the auto ancilliary space, there is still comfortable value and growth in these stocks. Some of them have “twin engines” because they sell in the domestic market and also in the export market.
In the logistics sector, there is also multi-year growth but the valuations are very high. One has to be careful with valuations and these stocks can be bought only if there is a steep correction.
Infrastructure & realty stocks – Avoid:
The Infra & realty space is avoidable. It was a leader in the previous bull market (2008) and will be a laggard in the present one.
Most key players in the Infra sector have problems such as regulatory (coal mines), heavy debt or corporate governance. It will be a long deleveraging cycle.
Even today, when the Nifty is at 8200, the infra and real estate stocks are making 52 week lows. At every correction, they are the first to give way. So, it is best to avoid the sector.
If you do want to buy stocks in the sector, pick stocks with good balance sheets. Or better else, buy the best large cap stocks.