As the Indian stock market reels under the selloff heat, some positional investors are busy scanning stocks in the hope of getting them at a bargain. For such investors, Prashant Jain of HDFC AMC has a suggestion. The fund manger has suggested positional stock market investors prefer large-cap stocks to mid-cap and small-cap stocks in current market scenario.
Speaking at a webinar titled ‘Mid-Year Review of Indian Economy & Markets’, Prashant Jain, Executive Director & Chief Investment Officer (CIO) at HDFC Asset Management Company (AMC) said, “Compared to small-cap and large-cap index, Nifty 50 index has witnessed lesser correction in the first half of CY22. So, it’s better to look at large-cap stocks ahead of small-cap and midcap stocks.”
He said higher inflation and rising interest rate is expected to go hand-in-hand with the markets and hence software or IT and pharma stocks can attract attention of the investors as these sectors remain almost insulated from the inflation and commodity price rise.
Suggesting positional investors to look at IT and pharma stocks, Prashant Jain of HDFC AMC said, “IT sector weigh around 15 per cent of the net strength of Nifty 50 index whereas pharma weigh around 5 per cent. So, around 20 per cent of Nifty comprises those stocks that is expected to remain unaffected by rising inflation and interest rates. After the recent sell-off, PE multiple of IT index has come at attractive valuations as well.”
The fund manager went on to add that India’s corporate profitability and bank balance sheet is in healthy condition and hence market might not get much affected in medium to long term in a rising interest rate regime as one thirds of the Nifty is weighed by banking stocks. He said that higher inflation leads to higher trade growth that may reflect in better quarterly numbers of the companies in medium to long term.
Gradual increases in domestic interest rates is expected to boost net interest margins of banks because they will be able to pass on higher rates to borrowers, say analysts.
Prashant Jain said that next 10 years will be quite promising for the Indian economy as it is expected to overtake China in terms of working population. Apart from this, India has gained cost comparativeness against China that is expected to help India Inc emerge as 5th largest economy in short term, he added.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.