Record-breaking rally but not everyone is party to it
IT sector has remained elusive as indices touch unprecedented highs, with Wipro and Tech Mahindra down nearly 40% from one-year peaks
Even as the S&P BSE Sensex and the Nifty50 gain ground and hit record levels, select stocks that comprise these two indices are still trading far away from their respective all-time highs. The performance at the bourses, data shows, remains polarised with the information technology (IT) counters taking the brunt of investors’ ire amid recession fears and remaining laggards in the recent bull-run.
Sample this: Shares of Wipro hit a 52-week high of ~726.7 on January 03, 2022, while those of Tech Mahindra did so on December 30, 2021 at ~1,837.8. At the current levels, both these counters are still 44 per cent and 40 per cent away from their respective highs, data shows.
“Investors have been chasing momentum since the past few years in a bid to make a quick buck. As a result, their bets have been concentrated towards stocks of companies that have shown earnings visibility and are on a sound fundamental footing. This, in turn, has resulted in polarisation across the market and underperformance of select stocks within the frontline indices,” explained G Chokkalingam, founder and chief investment officer at
Equinomics Research.
Among the other prominent ones, Tata Steel, HCL Technologies, Infosys, Bajaj Finance, Tata Consultancy Services (TCS), Bajaj Finserv, Asian paints and Ultratech Cement are some of the other counters that comprise the S&P BSE Sensex that are still 11 per cent to 23 per cent away from their respective 52week high levels.
Going ahead, Chokkalingam feels, this polarisation will continue in 2023 as investors chase momentum, but remain mindful of how the companies perform at the fundamental level.
“I see this trend continuing for at least two-three years. There will be a scrip/sector rotation, but this broad trend of a K-shaped performance will continue,” he said.
On the other side of the paradigm are ICICI Bank, Larsen & Toubro (L&T), Bharti Airtel, ITC, State Bank of India (SBI), Sun Pharma and Mahindra & Mahindra (M&M) from the S&P BSE Sensex pack that hit their respective all-time high level in November 2022.
Investment bets
So, which sectors and themes should you bet on for 2023?
While analysts remain bullish on the road ahead for the Indian markets and expect them to relatively outperform their global peers in 2023, those at Morgan Stanley remain bullish on consumer discretionary, industrials, financials, and technology; and remain underweight on all other sectors.
"Return correlations have fallen significantly, though they are yet to hit previous lows. This means that the market is transitioning from one driven by macro conditions to one where stockpicking will likely add alpha. When these correlations trough, sector positions should be narrowed and portfolio building should be bottom-up rather than topdown," said Ridham Desai, head of India research and India equity strategist at Morgan Stanley, in a report co-authored with Sheela Rathi and Nayant Parekh.
Those at Julius Baer, on the other hand, remain positive on domestic cyclical sectors such as manufacturing, cement, real estate, ancillaries and select autos, besides financials, industrials, given the potential for strong economic growth over the coming few years.
Those at Julius Baer remain positive on domestic cyclical sectors such as manufacturing, cement, real estate, ancillaries and select automobile stocks