According to stock market experts, in current market slump, IT and banking stocks are expected to give long term investors an advantage of bargain buying. They said that IT stocks are already at discounted prices and in current sell off, slide in IT shares would be limited. They went on to add that neither India nor the US is facing any banking or property bubble. So, slide in banking stocks in current sell off is short term and once the market get stabilised, banking stocks are expected to bounce back strongly as fundamentals that fueled bank stocks in recent sessions are still intact. They said that FII inflows are returning to Indian markets and their investment pattern suggests that that they invest majority of their money in banking and IT services stocks.
According to a Yes Securities report, "FII inflows are returning to Indian market and the best of FII flows are yet to come, with their positive shift for Indian equities in the fag-end of 2022." The report went on to add that India’s resilience to global turbulence is amply manifested in its outperformance. The moderated retail participation in the market (owing to decreased demat accounts) suggests that market is not in an overheated zone. In such a scenario, heavyweight stocks like Reliance Industries Ltd or RIL, banks and IT Services look attractive.
On why banking stocks are expected to bounce back strongly, Manoj Dalmia, Founder & Director at Proficient Equities said, "Neither India nor US is facing any kind of banking or property bubble. So, fundamentals of banks are still intact and hence triggers that fueled banking sector stocks in recent sessions are still existing and they are expected to help banking stocks pare the losses at rapid speed. So, positional investors, who believe in bottom finishing, are advised to look at quality banking stocks in this bear hit market."
Manoj Dalmia went on to add that dollar index has peaked and in the wake of rate hike cycle drawing to its close, US dollar is expected to ease further. In such scenario, FIIs who fished out their money from the Indian and other emerging markets are expected to come back. In such scenario, banking and IT services stocks are expected to attract FIIs attention as majority of FIIs prefer investing in banking and IT stocks.
Stocks to buy in current bear markets
Manoj Dalmia said that in banking space, Axis Bank and HDFC Bank are expected to outperform other private banks, when it comes to FII investment. So, long term positional investors can look at Axis Bank and HDFC Bank. However, Manoj Dalmia went on to add that Canara Bank, Bank of Maharashtra, PNB and SBI can also be a good bet for those who want to invest in PSU banks.
However, Manoj Dalmia advised IT services company stocks to buy instead of any IT company stock. He said that Happiest Minds and MindTree can be a good IT bet in current bear hit Indian stock market.
On why positional investors should not bother from current slide after key benchmark indices hit life-time highs, Yes Securities market outlook 2023 report says, "In the past, it has been observed that Nifty rallies around 20 per cent on average, after breaching its all-time high. Barring Nov 2010, all breaches have generated positive returns over the next 12 months. Interestingly, 5 out of 7 such breakouts occurred in November or December. A likely Déjà vu on the anvil."
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
