Samvat 2083 Strategy: According to Abakkus asset manager Sunil Singhania, the Indian equity markets could witness a broader-based rally in the coming months, with earnings growth and changing sectoral opportunities likely to determine the next phase of market performance. The market veteran believes that investors should look beyond the traditional large cap, mid cap and small cap classifications and focus on companies with strong future growth prospects.
According to Singhania, the return of foreign capital has brought greater stability to Indian markets, supporting the rupee and easing bond yields. The 10-year government security yield, which had climbed to around 7.45-7.50 per cent, has moderated to approximately 7.15 per cent. He also highlighted relatively decent corporate earnings and the correction in crude oil prices as positive factors for the Indian market outlook. Singhania expects oil prices to remain weak and sees the possibility of a further $15-20 decline, which could strengthen India’s investment appeal.
Sunil Singhania’s sectoral bets for Samvat 2083
Singhania believes the next phase of market growth will be driven by emerging sectors and businesses rather than conventional market-cap categories.
In financial services, he prefers niche non-banking financial companies (NBFCs) and capital market businesses over a concentrated exposure to traditional banking stocks.
In pharmaceuticals, Singhania sees opportunities beyond generic drug manufacturers, particularly in contract development and manufacturing organisations (CDMOs), healthcare and medical technology (medtech) companies.
Within the consumption space, he favours consumer discretionary businesses over a narrow focus on consumer staples. He also sees opportunities in platform companies.
Metals remain another key overweight sector for Singhania. He pointed out that the recent correction in metal prices, partly driven by a stronger US dollar and lower London Metal Exchange (LME) prices, has made several companies attractive from a valuation perspective.
Small cap, midcap or largecap: Where does Singhania see opportunity?
Singhania said the next market rally is unlikely to be restricted to a particular market-cap segment. Instead, the focus should remain on companies that can deliver faster earnings growth.
He observed that smaller companies had reported stronger earnings growth during the first half of the financial year. However, large cap companies have grown almost at par with mid cap and small cap companies in the latest quarter.
Auto sector outlook: Focus on EV strategy and ancillaries
On the automobile sector, Singhania said October sales numbers came in stronger than expected despite a higher base following GST-related changes. He said his investment approach has been to play the automobile theme through auto ancillary companies rather than taking direct exposure to automobile manufacturers. However, he cautioned that the sector remains vulnerable to technological disruption. Companies without a clear electric vehicle (EV) strategy could face headwinds as EV adoption increases.
Singhania believes investors should prioritise automobile companies with a clear long-term strategy, as electric vehicles are expected to gain market share.
Financials over IT services: Singhania explains his investment view
Singhania pointed out that dollar revenue growth guidance for IT companies remains around 2-3 per cent. He explained that the sector’s 13-15 per cent rupee revenue growth last year was partly supported by approximately 10 per cent rupee depreciation. If the rupee appreciates on a year-on-year basis amid improving sentiment towards the Indian economy and a possible easing of geopolitical tensions, rupee revenue growth for IT services companies could potentially be close to zero, he said.
He added that IT services stocks have also been behaving like an anti-AI trade, gaining when AI-related stocks decline. However, he believes some global AI companies have become attractively valued and could witness a recovery.
Crude oil outlook: $20-25 war premium still priced in
On crude oil, Singhania maintained a bearish outlook, citing adequate global supply and the possibility of a reduction in the geopolitical risk premium. He estimated that crude oil prices currently carry a war premium of around $20-25 per barrel. According to him, any positive development towards a settlement in West Asia could trigger a sharp correction in oil prices. He noted that WTI crude could potentially decline from the late-$80 levels towards the $70 range if geopolitical tensions ease.
Singhania added that higher crude oil prices are also accelerating the global shift from fossil fuels towards electric alternatives.
Abakkus asset manager Sunil Singhania’s investment strategy for Samvat 2083 centres on identifying businesses with sustainable earnings growth, diversifying beyond traditional sector leaders and remaining selective in segments where valuations continue to be elevated.
Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience consult their financial advisors before making any money-related decisions.)