The BSE Metal Index tanked over 7 per cent, and BSE Oil & Gas Index slipped 6 per cent in the market fall, which took place earlier this month.
While these sectors have bounced back, they are not the ones market experts are banking on going ahead.
Experts feel that sectors like IT, steel and auto will take the market leadership in their hands going forward.
This they feel is on the back of uncertainty in global interest rates, and commodity prices, which would put pressure on other sectors like manufacturing.
IT is the place to be; it is a safe haven
So say majority of the analysts. Upendra Kulkarni of Fortress Financial Services says, "With the interest rate scenario, inflation and commodity prices situation we think that sectors that have more to do with manufacturing are the ones that will remain weak. IT will gain a lot now since the dollar is improving, they might see a little pressure on the salary front, but otherwise they have better opportunities."
He adds that with pressure being there on western countries to perform, it is more likely that outsourcing will take place and the larger contracts will come to the large caps like Infosys, TCS and Wipro. "Therefore I feel these three, and Satyam to some extent will do well and are our top picks," he says.
Sumit Rohra of Antique Stock Broking also agrees. He says, "The current rupee depreciation will add to the bottomline of IT companies. With uncertainty surrounding global interest rates, IT will emerge as the safe haven. It will be a defensive play now."
He further says that IT has not participated much in the last market rally, it mostly moved in the sideways direction, so it would move now. "My picks among the midcap IT companies would be Macro Technologies. Kernex Micro since it is into the niche space of developing ACDs, also Hinduja TMT. All these three are available at below 10 PE, so they look attractive. Among the large caps I like Infosys and TCS, they can be bought even at their current levels and will give phenomenal returns over the year," says Rohra.
For the medium-term, Rohra is also bullish on cement, he feels that cement companies might correct a bit due to monsoon, but post July-August cement will do well again.
On the back of fuel hike, which is slated to come in this week, Rohra is also bullish on auto. Hero Honda is among his favourites from this sector.
Steel, auto and pharma not far behind
Kulkarni is bullish on pharma since he feels it will also benefit from the outsourcing story. His top pick in this space is Ranbaxy.
Technical analyst, V K Sharma is bulish on capital goods. He says, "Leadership has to come and we have started seeing good buying happening at the bottom whether it is Siemens India, ABB, Alstom Projects or Cummins India, they have risen from their lows. I feel particularly those stocks where the companies are making India as base and where the margins are improving, those will benefit more. Sooner or later investors will have to come to this sector as a safe place to hide even if the markets were to remain in a slow momentum."
Sectors to watch: IT Pharma Steel Cement Auto Capital Goods
Stock picks: Infosys TCS Wipro Satyam Macro Technologies Kernex Micro Hinduja TMT Tata Steel Sail Ranbaxy M&M Hero Honda
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