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Investment ideas: Commodity rally’s over; here are 4 sectors to invest in: Nischal Maheshwari


“We are seeing some amount of froth going out of the chemical sector. So corrections have happened and maybe on some deeper corrections, one can buy,” says Nischal Maheshwari, CEO-Institutional Equities, Centrum Broking.

What does the market look like to you at this point of time? There is a constant flip flop happening, there is no direction in the market. What would you advise a retail investor to do at this point? Should they hold on to their investment or start nibbling into some names as well?
The market has corrected quite a bit. Some pockets of value are emerging and if you happen to own one of them, definitely you should average it out in this kind of market. I do not think this market is crashing one way. Basically, wherever you feel comfortable and the current quarter’s results are good for that company, one should be looking to average it.

What is the sense when it comes to the metal space? It had been butchered out of shape yesterday on the back of the news on imposition of export duty on steel. Are metals in for a further rout in the long haul?
In the short term, there might be more pressure on metals. There is a possibility that export duty is imposed on non-ferrous metals as well and that is why we are going to see some correction in the non-ferrous metals also. But in the medium to long term, we continue to remain positive on metals and as demand improves, the stock should start doing well.

How are you looking at some of these new-age tech companies? The likes of , have moved up after falling 50% to 70% from highs.
Most of these companies should be avoided barring a few of them. Most of them do not have a plan to be profitable in the foreseeable future and that is a cause of worry. The market does not like too much uncertainty as far as outlooks are concerned. That is why the stocks have fallen quite a bit. Yes there is value, no doubt, but in this kind of market where good quality largecap stocks have fallen 30% to 40%, we would prefer buying those largecap Nifty stocks, rather than actually going into any of these companies.

What is your take on the entire commodity basket? Other than export duty on steel, there has been an excise cut on fuel. Now reports are suggesting that there might be levies as far as edible oil and sugar is concerned as well. Do you think the rally or the positivity that was there around the sector at the start of the year has now fizzled out?
I think so because globally or in India, the focus is very clearly to tame inflation. Across the world, all central banks and also the governments will do anything to control inflation. So they will put tariffs or duties wherever it is required to bring down inflation that is what they have done, though in case of steel, it may not have much impact but sentimentally, definitely it has a vast impact. I think maybe the purpose of the government is also to bring down the expectation of inflation, rather than inflation itself and that goes a long way to tame inflation. So I think the commodity rallies are over.

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We are also seeing a lot of sector churn and now there is fresh optimism around the auto sector. How are you looking at it? Is this the right time to invest or would you wait and watch?
We have been positive on autos and a couple of quarters back, we turned positive. At that point of time, the call was more on valuation because the industry was still facing a lot of pressure as far as demand is concerned. Last quarter, for the first time, we saw good demand coming in largely because of the wedding season and now very clearly we see demand coming back, cost pressures going off and valuations continuing to remain positive. Overall, the sector looks interesting at these prices.

Which are your top bets at the moment? Which are the pockets that are looking attractive either on a value basis or growth basis?
Autos is one of the sectors we are positive on. The other one is banking. Largecap banks have corrected quite a bit and the ownership also basically has come down dramatically. We also like the defensive sectors – pharma and FMCG. We have also started liking largecap IT because there also, the correction has been quite good and demand does not seem to be going away.

So yes, there is some pressure on the margins, but demand still continues to stay pretty healthy. These are the four, five sectors, we are asking our clients to invest in.

Do you have any interest in the chemical space?
Yes, we have liked it quite a lot. It has been a space we have been positive for the last five years but in the recent past, for a couple of quarters and at least a couple of quarters more, the pricing pressure will continue. The raw material cost is causing a problem for the whole industry because of China lockdowns and the end consumers not being willing to take on the whole price increases. So, we are seeing margin pressures coming on.

Secondly, the China plus strategy has not worked out as well as what people would have expected. That is why we are seeing some amount of froth going out of the sector. So corrections have happened and maybe on some deeper corrections, one can buy.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)

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