The Indian stock market is drawing attention due to its valuation opportunities. However, not all segments are equally promising. Market expert Arun Kejriwal believes that large-cap stocks are where smart investors should focus. While the entire market may not be a buy right now, the long-term potential of India’s economy will eventually become evident to global investors.
“I’m not suggesting that you go and buy the market tomorrow. But, at some point of time the advantage that India’s economy offers will be visible to the world in the longer run. Smarter investors will start looking at India at least in the large-cap segment.”
Pharma Sector: A Sweet Spot 💊
According to Kejriwal, India’s pharmaceutical industry is in an ideal position. India plays a major role in the global pharma market, particularly in the generic drug segment. Generic medicines face high duties, but these costs fall on consumers rather than manufacturers, making the sector attractive for investors.
Banking Sector: A Strong Performer 🏦
Another sector that Kejriwal finds promising is banking. He emphasizes that financial stocks, particularly large-cap ones, are worth considering. The Banking, Financial Services, and Insurance (BFSI) sector makes up nearly 43% of the Nifty index, meaning that any significant market movement will require participation from banking stocks. Within this sector, housing finance is also an area worth exploring.
Mid-Caps and Small-Caps: High Risk, High Reward 📈
When discussing mid-cap and small-cap stocks, Kejriwal warns investors about their volatility. While these stocks offer high returns, they also carry significant risks. Given the market’s recent correction, investors must evaluate their holdings carefully.
“These are typically high-risk and high-return items. But when the chips are down, you need to move to safety, which only the large caps can offer.”
Investors should assess whether they have bought these stocks based on fundamentals or market momentum. If a stock was acquired due to strong fundamentals, it is advisable to hold it despite short-term dips. However, stocks purchased solely due to momentum may not recover, as each market rally brings a new set of trending stocks.
PSU Stocks: Overheated and Risky ⚠️
Kejriwal also comments on Public Sector Undertaking (PSU) stocks, especially those in defense, railways, and power. Many retail investors have rushed into these stocks, causing their valuations to surge by 7x within three-and-a-half years. Such excessive growth makes them highly vulnerable to corrections.
“Within the PSU theme, there have been three segments: Defence, railways and power. This is where I believe the bulk of retail money or new investors just put in their money and purchased shares. Some of these stocks went up to 7x in a span of three-and-a-half years. They came to levels which were ridiculous under all circumstances.”
Despite recent declines, Kejriwal suggests that PSU stocks might still experience further downside.
Key Takeaways for Investors 📌
- Large-cap stocks are the safest bet – They offer stability during market corrections and remain attractive for long-term investors.
- Pharma and banking sectors are worth considering – The pharma industry benefits from global demand, while banking stocks are crucial for market movements.
- Mid-cap and small-cap stocks require careful evaluation – Only fundamentally strong companies should be held for long-term gains.
- PSU stocks are risky after massive rallies – Investors should exercise caution, as some may still face corrections.
Final Thoughts 💡
India’s market is becoming attractive, but investors must be selective. Large-cap stocks in pharma and banking are promising, while caution is needed with mid-cap, small-cap, and PSU stocks. By focusing on fundamentals and long-term growth, smart investors can navigate the market with confidence.
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Disclaimer: This article is for informational purposes only and not financial advice. Always do your own research before investing.
source : businesstoday
