Jul 16, 2004|
Sectors: What is our view?
"Market can stay irrational longer than you can stay solvent," said John Maynard Keynes. The current stock market situation, to an extent, can be explained in this context. In these volatile times, it is a very difficult task for retail investors to determine which sector to be invested in. To make things a bit easier, here is an attempt to highlights key positives and negatives from some sectors.
||On the positive side
||On the negative side
||Domestic infrastructure spending and capacity expansion led growth
||Pricing environment could turn adverse, but not in the near term
||Robustness in industrial sector accompanied by softer interest rate to support growth, but at a lower rate
||Peaking efficiency levels and valuations running ahead of earnings for most players
||Non-food credit off-take on the corporate side and stable retail loan demand
||Can advances keep pace if interest rates rise? Scenario of lower other income. Regulatory situation in a flux
||With demand-supply situation favorable, prices could increase at a faster rate
||Fresh capacity expansion announcements to affect valuations
||Private and public spending in infrastructure promising
||Performance failing to match expectations and the likely impact of the same on valuations
|Oil and gas
||Stable demand side prospects and valuations
||Crude prices and the government's stand on pricing
||Supply exceeding demand and loosening of production constraints
||Gas pricing scenario and excessive governement control
||Growing middle-class populace and rising per-capita income should reflect in demand going forward
||Margins plateauing, increasing competition and valuations reflecting growth in the near-term
||Occupancy and ARRs to remain robust
||Robust growth in subscriber base and pay channel model gaining acceptance
||Progess on CAS implementation and revival in adspend
||Barring near term visibility concerns, long-terms signs are positive
||Who will benefit the most i.e. R&D, generics or contract manufacturers? The laggards may lose premium valuations
||Highly linked to the pace of capacity expansion. Distribution to throw some surprises
||Political intervention and valuations running ahead of fundamentals
||The case for outsourcing strengthening each day
||Not all companies are positioned well. Stretched valuations for select stocks
||Infrastructure spending provides demand side cushion
||Softening prices, import competition and plateauing efficiency levels
||Post 2005 quota regime posts big opportunities combined with a stable domestic demand situation
||Firm cotton prices and valuations running ahead of fundamentals
As we have maintained earlier, stock markets always tend to wait for a trigger. While there are genuine concerns, investors have to realize equities are a better asset class to be invested in from a long term, usually three to five years. Depending upon one's risk-return profile and keeping the aforesaid opportunities and concerns in mind, invest in a staggered manner and utilise this weakness in the market as an opportunity for the long-term.
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