ETMarkets Smart Talk: Top 15 stock ideas across sectors till Diwali 2023: Arpit Jain

“One can keep a sector-specific approach while selecting stocks. A largecap focussed portfolio looks interesting and some mid-cap and small-cap companies can also be added,” says Arpit Jain, Joint MD, Arihant Capital.

In an interview with ETMarkets, Jain, who has over 10 years of experience, said: “We believe the India consumption theme will do well. The auto-auto ancillary space is one space where the local theme players can pick companies like Maruti, Hero MotoCorp and Bajaj Auto" Edited excerpts:

Where do you see markets headed by next Diwali?
We believe that India should do good in Samvat 2079, India has been a constant and big outperformer in 2078 despite the depreciation of the Rupee.

Q2FY23 result season has begun on a good note, especially for the Banking sector which is the backbone of the economy. The non-performing assets (NPAs) are under control and credit growth has started picking up.

For most of the other sectors also results are satisfactory, however, margins have taken a dip due to higher costs. However, with commodity prices cooling off, these margin pressures will subside.

Inflation will also start cooling off. With these parameters, we are likely to see good positivity in markets.

However, global rate hikes and inflation worries continue along with the rupee depreciation. Due to these, we may see volatility in the markets continuing.

Any big factors which the Street must watch out for in Samvat 2079 that could derail the bull run?
We need to closely watch the dollar-rupee balance. A weak rupee is impacting the fiscal health of our economy. Interest rates can play spoilsport, but there are some early signs that commodity prices are bottoming out, which should benefit the Indian economy.

Apart from global themes, the markets should keep an eye on how the rural economy is currently performing and how it is going to play out going forward. India is an agrarian country & by the grace of God, we had a good monsoon.

We believe that the government will push a lot of agri schemes which should push further spending in the agri sector, especially on the rural side which will boost the earnings in the priority sector.

The economy has opened from COVID fears after 2 years & consumption has started picking up decently. Companies with good domestic demand & having less reliance on imports are likely to do well.

For those companies which are heavily dependent on exports to US & Europe, we need to closely watch for the possibility of a recession in those countries.

Which sectors are likely to remain in limelight in 2079 and why?
The economy will gain momentum with robust consumption, so consumption and discretionary spending sectors should do well.

Companies using commodities as raw materials- such as pipe manufacturing- may see demand benefitting from low commodity prices. Some companies in auto, auto-ancillary space should also do well with low commodity prices.

For Banking & financials sector, we are seeing credit growth coming back, which was missing during COVID times.

This is the key parameter for the sector to do well. Govt has thrust on Infrastructure & Defence. We will see a lot of interest in these sectors.

What is your view on the IPO market for SAMVAT 2079?
IPO markets should see a revival but not a frenzy as seen in the early part of 2078. Now we believe the IPO market will be relatively stable and the markets will focus on companies with stable cash flows, proven business models, and visibility of earnings.

Rupee seems to head south almost on a daily basis compared to the USD. Where do you see the currency headed in Samvat 2079?
Most of the other global currencies have become weak against the dollar. Therefore, it is more of a global phenomenon rather than India specific problem. The rupee has also depreciated almost 12% to 15% in the last 12 months.

But, it seems to be performing relatively better than its peers and even some of the stronger currencies like the Euro and GBP.

This signifies our strength vis-a-vis global currencies. One needs to keep a close watch on global developments to understand or predict the Rupee’s movements in Samvat 2079.

Amid the falling rupee, where do you see Gold headed in Samvat 2079? Should it be part of one’s portfolio?
As equities as an asset class did very well in the last 2 years, there was less focus on gold, and we saw that the prices remained almost stagnant.

With the current dollar index, we may not see any immediate outperformance in this precious commodity. However, diversification is always good for a portfolio. Considering the safety & liquidity of gold, one should allocate some portion of funds toward gold.

Gold ETFs can be added to one’s portfolio to the extent of 5-7% in the current scenario. Any concerns on the global or domestic equities in the future will bring back focus on Gold. In such a scenario, one can increase the allocation to gold to 15-20%.

Which are your top picks for SAMVAT 2079?
One can keep a sector-specific approach while selecting stocks. A large-cap focussed portfolio looks interesting and some mid-cap and small-cap companies can also be added. We believe the India consumption theme will do well.

Auto: Maruti, Hero MotoCorp and Bajaj Auto.
The auto-auto ancillary space is one space where the local theme players can pick companies like Maruti, Hero MotoCorp and Bajaj Auto.

Auto Ancillary: Jay Bharat Maruti or JBM Auto
In the auto ancillary space, there will be some pickup companies such as Jay Bharat Maruti or JBM Auto, which is a supplier to Maruti and also in the EV segment.

Travel and discretionary spending: Dollar Industries
Travel and discretionary spending companies such as Dollar Industries can be looked at. But even in discretionary spending, rather than picking individual stocks, it is better to look at these themes in general for Samvat 2079.

Agrochemicals space: Rallis India and Sumitomo Chemicals
In the agrochemicals space, Rallies India which is a Tata Group company is expected to do very well and Sumitomo Chemicals is also interesting.

Banking: Ujjivan SFB, SBI, Axis Bank, ICICI Bank, DCB and PEL
In banking, Ujjivan SFB, and SBI look interesting. We also like Axis Bank at lower levels, ICICI Bank, Federal Bank & DCB look interesting. In the NBFC space, PEL looks interesting.

In cement we like Ultratech. Reliance is one stock that we believe can be added on weakness. One can make a diversified portfolio and even invest in railways and related infrastructure themes, which should also do very well.

We think companies like KEC International, TWL, Kernex Microsystems, Texmaco Rail, and Kalpataru can be interesting adds. Some of the companies with linear balance sheets in the infrastructure space like KNR Infra can also be considered.

What would be your one portfolio advice you would like to share with readers?
The primary advice we will give readers is to do their own research and diversify their asset allocation. With rising interest rates, some amount of secured debt allocation also must be there.

One must monitor their equity portfolio on regular basis by tracking quarterly results and valuations of the companies to decide the right time to exit stocks.

If you cannot track all such factors on a daily basis, then it is good to take professional help or even invest using mutual funds.

Your view on earnings – do your earnings improving in Samvat 2079?
For the results that are reported so far, we have seen improvement in earnings, especially in the banking sector.

For other sectors, results are more or less in line. We had seen a higher base in 2078 because Samvat 2078 saw a lot of pent-up demand.

Some impact of a slowdown in Europe is likely to be seen, but if things improve, we believe India can deliver a 10-15% growth rate on the earnings side, and it is even possible to see a 17-18% margin growth as well.

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