Indian shares are still in correction territory despite the recent pullback, with the Nifty50 being 10 percent below its peak. Some are even calling it one of the slowest bear markets. Slowing global economy, talks of recession, and overheated valuations, are on investors' radars — both globally and in India — while sustained foreign institutional outflow continues to play spoilsport for the eighth month in a row.
Yet, signs of less-aggressive-than-anticipated hikes in COVID-era interest rates are giving investors something to cheer about — at least for now.
How do you make your portfolio weather this kind of turmoil?
Banks offer the best combination of growth and value given their derating relative to other sectors, said R Venkataraman, Chairman of IIFL Securities and Co-Promoter of the IIFL group.
'We would like to be overweight private banks in our portfolio. We also like trucks and rural as other themes... Rural is beginning to do well thanks to the strength of soft commodities filtering through the agri economy over time and sustained government support," he said in an interview to CNBCTV18.com.
He also finds FMCG companies attractive among discretionary sectors.
Besides, he is banking on good IT names, drug makers with promising brand portfolios and above-industry growth, and some hospital and insurance stocks.
The 50-scrip benchmark has come within one percent of its all-time high, clocked in October 2021, on multiple occasions and retreated in the past few months.
Even export-heavy spaces like IT have borne the brunt in the correction, despite the rupee touching a series of lows against the US dollar. Weakness in the rupee boosts the profitability of exporters.
Venkataraman believes IT still remains expensive.
IT is among the sectors hit hard by persistent selling by FPIs, though outflows eased somewhat in the first 15 days of May compared with the previous fortnight.
Date | Net investment by FPIs | |
In crore rupees | In million dollars | |
May 1-15 | -5,628 | -728 |
Apr 16-30 | -7,914 | -1,036 |
Venkataraman told CNBCTV18.com that liquidity tightening will keep price-to-earnings multiples in IT at elevated levels.
"Inflation has hardly come off and is a long way away from the US threshold of two percent, and till then or till visibility on inflation reducing improves decisively, liquidity will keep tightening," said the financial services veteran.
However, he also said that in his view, the market is in the last stages of this compression.
Stock | Return (50 | Price to earnings (TTM) |
TCS | -5 | 32.3 |
Infosys | -11.1 | 30.3 |
Wipro | -14.3 | 21.5 |
HCL Tech | -7.7 | 26 |
Tech Mahindra | -17.5 | 23 |
L&T Infotech | -23.4 | 32.5 |
Mindtree | -22.5 | 30 |
L&T Tech | -21.2 | 41.1 |
Mphasis | -16.7 | 39.3 |
Persistent | -4.3 | 42 |
Oracle | -3 | 15.7 |
Tata Elxsi | 25.6 | 91.5 |
"Overall, this is not the time to be very bullish," he said. "We would be a bit worried about tightening liquidity globally, and the dampening all round effect it will have on growth and earnings multiples. Though it will also influence input costs favourably on the raw mat front, it will impact financing costs adversely."
He does not see liquidity tightening ending anytime soon.
"With that, the markets will continue to have a distinct downward bias. It holds true internationally and in India," he warned.
The best pillars for your portfolio now
Venkataraman believes in the fintech disruption story. His mantra: "Any start-up or fintech that offers ideal, frugal and scalable solutions for financial services that benefit customers or offer a new solutions will always be successful in the long run."
Banking
HDFC Bank and ICICI Bank
IT
Infosys and Persistent
Pharma
Cipla and JB Chemicals
Hospitals
KIMS and Rainbow
Auto and related stocks
Hero MotoCorp, Tata Motors, Ashok Leyland, Cholamandalam and Craftsman Automation
FMCG
Hindustan Unilever and ITC
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