Domestic markets, following the trend of global markets, fell sharply amid weak Chinese manufacturing data and a surprise devaluation of its currency, which rattled the global economy and risk assets, in general. Indian markets were no exception. However, at the same time, this has created opportunities, which in our view, provide an attractive entry point for investors from a two to three year horizon. Hence, we recommend investing into quality large cap and midcap names that have reasonable growth visibility coupled with strong balance sheets.
Currently the global markets are volatile. Therefore, we advise investors to buy in a staggered manner. Given a sectoral perspective, we are positive on auto, cement and capital goods (cyclical recovery in earnings aided by lower input costs and declining interest rates will provide strong operating and financial leverage). We have a positive to neutral rating on IT, pharma and consumers (rich valuations amid moderation in earnings but supporting depreciating currency) while we are negative on metals, oil & gas and real estate.