What should investors do as India looks to shine amid global gloom?

The sharp recovery from June lows has helped benchmark indices recoup all the year-to-date losses. 

The YTD gains for benchmark Nifty50 and Sensex indices now stands at over 1%. In comparison, global peers across the US, Asia and Europe are down in the range of 2% to 42%.

Analysts say the one-way rally over the past two months has been triggered by strong foreign portfolio investments, drop in commodity prices, and hopes of less aggressive rate hike by the Reserve Bank of India.

They also expect India’s relative outperformance to continue as it looks better placed with a healthy economic recovery and remains one of the fastest growing major economies.

So, which are the stocks and sectors that should be on your radar?

Analysts say investors should start nibbling in stocks with a focus towards the domestic economy-related sectors.

Sunil Subramaniam, MD and CEO, Sundaram Mutual says global economy is going through anticipated downturn and India stands out as a shining light. Fall in oil prices ensues positive for the Indian economy. 

Focus on Infrastructure, capital goods, building materials. Falling commodity prices to benefit discretionary consumption, automobiles, housing sector. Banks, NBFCs other key beneficiaries. 

Nitin Raheja, Executive Director, Head - Discretionary Equities, Julius Baer Wealth Advisors, too, has a similar view. He says, India likely to have one of the highest GDP growth rates globally. This may be driven by financials and domestic consumption. BFSI, real estate, mortgage finance, building materials and hiring businesses doing well. 

Among individual stocks analysts say export-oriented themes may give muted returns in the near-term.

Thus, one could focus on domestically-focused stocks like L&T, UltraTech Cement, JK Cement, Tata Communication, Indraprastha Gas, GAIL, Brigade Enterprise, Tata Motors, Ashok Leyland, Dabur India, Jyothy Labs, Sapphire Foods, SBI, IndusInd and SBI Card.

That said, weak global demand, and uncertainty with respect to global energy situation makes India vulnerable with respect to inflation, current account deficit, corporate profitability and currency. 

On Friday, markets will react to the European Central Bank’s interest rate decision, and assess US Fed chair Jerome Powell’s speech at the Cato Institute’s conference.

That apart, oil prices, dollar index movement and stock-specific cues will guide the indices.