Stock markets are likely to remain upbeat in 2014 after modest gains in the last year, experts say, while putting across a particularly bullish outlook for sectors like IT and pharmaceuticals.
The BSE IT index emerged as the best performer among the 13 sectoral indices, outperforming the benchmark index Sensex, in 2013. The gain of 59.52 per cent in IT sector index was way ahead of the Sensex's nearly 9 per cent rise.
Among major gainers from the IT sector last year, TCS, Infosys and Wipro shot up by 71 per cent, 51 per cent and 40 per cent, respectively.
Besides, the healthcare index soared higher by 22.29 per cent while FMCG sector was up 11 per cent last year.
"We expect continued out-performance from IT and pharma given the weak macro-environment. However, sectors like financials, despite asset quality concerns, and other rate-cyclicals, are likely to remain in focus, given the expectations of economic recovery and a turn in investment cycle," said Tirthankar Patnaik, Director-Institutional Research, Religare Capital Markets.
A better-than-expected US recovery may accelerate tapering process, leading to renewed pressure on all emerging market currencies, both of which augur well for IT and pharma, he said.
IT stocks rose sharply this year on the back of a better macroeconomic environment in their major market US and due to gain from rupee depreciation.
The rupee fell sharply by 12.54 per cent last year.
Technology stocks were beaten down during 2012, mainly on account of Euro zone crisis.
"IT sector has outperformed in 2013, leaving behind other sectors by greater difference. The key reason has been strengthening of dollar, which improved the profit margins, and also improving demand in global markets. So, we expect IT sector will perform well in 2014 as well, as the trend is expected to continue," said Nidhi Saraswat, Senior Research Analyst, Bonanza Portfolio.
Another sector which is a consistent performer is pharma. The companies are exploring newer markets worldwide. Cost control and margin improvements will augur well for the sector, she said.
According to Varun Goel, Head PMS, Karvy Stock Broking: "With interest rates not expected to increase a lot, we have turned positive on rate sensitive sectors like banks and auto. Public sector banks are trading at quite cheap valuations and we expect significant out-performance from that space in the next two to three years."
"Expect export oriented sectors like IT to continue to benefit from rupee depreciation seen last year. Telecom is another sector which might deliver strong earnings due to return of pricing power and reduction in competitive intensity," Goel added.
