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Auto to defence: Which sectors should you invest into post elections?

The structural long-term equity bull market for India is intact, driven by strong domestic driving forces

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Sunainaa Chadha NEW DELHI

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 Indian equities are expected to continue their upward climb, with key sectors like Auto & Auto Ancillary, Cement, Defence, Railways, Consumer Durables, Energy, Logistics, FMCG, Capital Goods & Engineering, Infrastructure, Construction, Banking, and Financials leading the charge, said Pantomath Financial Services Group in its quarterly market report.  These sectors are poised to outperform in the coming rally, backed by strong domestic fundamentals.

While some sectors like Information Technology, Specialty Chemicals, and Metals haven't kept pace, they present an attractive value buying opportunity for investors seeking long-term gains at potentially lower entry points.

The financial conglomerate remain bullish on the overall Indian equity market, citing robust domestic economic growth, supportive government policies, and ongoing reforms as key drivers. This structural bull market is expected to continue, presenting a compelling opportunity for investors with a medium to long-term horizon.
 

Sectoral Highlights 

Sugar Sector
The sugar sector remains in focus due to the government's emphasis on increasing ethanol production, aiming for a 20% blending target by 2026. This policy, highlighted in the BJP manifesto, benefits ethanol-heavy sugar companies. The government's plan to promote multi-feed distilleries for ethanol production aims to diversify feedstock beyond sugarcane, potentially reducing the sugar sector's reliance on traditional crops while supporting India's biofuel goals.

 Real Estate & Banking and Financial Sector
The  real estate market is set for growth, driven by government policies and urbanisation, requiring Rs 14 lakh crore ($170 billion) in debt financing from 2024 to 2026. Mumbai, NCR and Bengaluru are expected to benefit the most, with significant increases in construction finance and lease rental discounting (LRD), which are anticipated to increase by 40% over the next three years. This will be positive for the Banking and financial sectors as well. 

Telecom operators made a Tariff hike post election results including Reliance Jio, Bharti Airtel and Vodafone Idea, which have raised tariffs to monetise 5G services, potentially improving sector financials. Experts believe tariff hikes are a positive step and the sector could be ripe for Re-rating, said Pantomath.

Cement Sector
In the cement Sector, big players are expanding through inorganic acquisitions, expecting 6–7% compounded growth in the coming years, with top five players set to dominate over half the market by March 2025.

FMCG Sector
FMCG companies have started guiding for recovery in business from rural regions. For the first time in several quarters, there is positive guidance for at least the next two quarters, based on factors like a normal monsoon, robust rabi crop, bumper wheat crop and government measures, such as an increase in MSP and higher spending on MNREGA. This is expected to maintain robust rural demand throughout the year.

Automobile
India may roll out the FAME 3 Scheme to encourage the sale of electric vehicles in the upcoming budget. Electric two, three and four-wheelers are expected to be supported under the Faster Adoption &  Manufacturing of Electric Vehicles (FAME) scheme, which could receive a budgetary allocation of about Rs 10,000 crore.

"The structural bull market for Indian equity remains intact, supported by strong domestic fundamentals, government policies and reforms," the report added. 

 “Corporate earnings growth momentum, Strong GST collection, Capex cycle revival, Strong credit growth, strong domestic demand environments, Positive global market trend, are the positive factors while unexpected surge in crude oil prices, Rise in trade deficit &  Geo-political concern are potential near term uncertain risnks for the overall GDP growth of the economy," said Deena Mehta, Managing Director, Asit C Mehta Investment Intermediates.

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First Published: Jul 18 2024 | 12:13 PM IST

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