Market Shifts to Selective Bets as Diverging Earnings Highlight Power, EVs, and Midcaps, Says Siddhartha Khemka.

India’s equity market is navigating a critical juncture where selective stock picking is becoming increasingly essential, as highlighted by Siddhartha Khemka, Head of Retail Research at MOSL. The current landscape is characterized by stagnant large-cap earnings coupled with enduring macroeconomic challenges, dampening the overall market outlook. Despite this, mid- and small-cap companies are exhibiting resilience, with Khemka noting a better-than-expected earnings growth of approximately 17-18% within this segment, surpassing prior estimates of 14-15%. This divergence suggests that while macro pressures persist, opportunities for growth may still exist within select niches of the market.

Investor sentiment is currently being tempered by factors such as elevated crude oil prices, a depreciating rupee, and forecasts for below-normal rainfall from the Indian Meteorological Department. These macro headwinds are projected to impact market dynamics in the coming quarters. In this context, Khemka advises a focus on domestic themes that demonstrate robust earnings visibility. He emphasizes a bottom-up investment approach, encouraging investors to selectively engage with stocks and themes that display consistent earnings performance.

Among the sectors poised for potential growth, Khemka identifies cables and wires, cooling products, manufacturing, and power as particularly promising. Companies such as Polycab, KEI, and RR Kabel are highlighted as strong candidates. The power sector is underscored as a structural theme due to rising electricity demand and investments in renewable energy, with JSW Energy, Tata Power, and NTPC as key beneficiaries. Additionally, Khemka favors Coal India as a preferred dividend-yield play over ITC, noting its robust volume growth and improving realizations.

In the automotive sector, electric vehicles (EVs) are gaining traction as the preferred investment avenue. Khemka recommends Ather Energy and TVS Motor for two-wheelers, while indicating optimism for Tata Motors in the passenger vehicle segment, especially following its strategic divestment in the commercial vehicle business. This focus on innovation within the EV space suggests a paradigm shift in consumer preferences and investment strategies, further reinforcing the need for targeted stock selection amidst prevailing uncertainty in broader market conditions.

Source: The Economic Times

(Expert Note: This report was prepared by the Wealthova team.)