ETMarkets Smart Talk - Auto, QSR, and defence among top picks in current market cycle: PL Capital's Sandip Raichura
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In this edition of ETMarkets Smart Talk, Sandip Raichura, Executive Director and CEO – Retail and Distribution at PL Capital Group, shares his market outlook amidst global uncertainties and domestic triggers.While the broader indices may face near-term pressure, Raichura believes momentum in Indian equities remains intact, driven by a combination of structural and cyclical factors.In an insightful conversation, he outlines why Auto, QSR (Quick Service Restaurants), and Defence sectors are emerging as strong investment themes in the current market cycle, and how investors—both retail and HNIs—can position their portfolios for the long haul. Edited Excerpts -A) We had earlier forecast a recovery from 22k levels to 25k levels currently. We now expect the indices to face some near-term downward pressure as a lot of global developments are keeping markets on tenterhooks.However, a good and timely monsoon coupled which could spur rural demand, tax breaks for the middle classes in the Union Budget and globally, positive developments on tariff wars could keep the markets positively biased.We expect Nifty to have reached its fair value around current levels, but momentum could carry these higher especially if the US dollar corrects from 99 levels towards 92 or so. Any rate cuts by RBI beyond expectations could of course have a much stronger positive impactA) While the overall earnings season has shown resilience in certain sectors, the prevalence of downgrades suggests caution among investors.March 2025 Quarter has presented a mixed picture, with a notable trend of earnings downgrades surpassing upgrades. The Earnings upgrade-to-downgrade ratio stood at 0.3x, the lowest since Q1FY21.A) Our sense is that most of the lapses have been corrected, and no significant deviations are expected. For FY26/27E we trim loan growth by 5%/2% to 8%/11% and subsequently due to cascading effect cut NII by 15%/13%.This would result in an earnings cut of 31%/26% and ABV reduction of avg. 8.6%. RBI has requested proposals for new CEO appointment by 30th Jun'25; near to medium term performance would hinge on the pedigree of the prospective CEO and the respective strategy to improve governance, credibility and fundamentals.Stock is trading at 0.8x on Mar'27 ABV; we maintain multiple at 0.9x but cut TP to Rs780 from Rs860. Retain HOLD.A) Markets seem to have digested the uncertainty related to global tariff wars on hopes of lesser disruption and trade agreements by major economies.However, an end to global turmoil is not in sight as Chinese growth is slowing down, US interest rates are holding steady and interest rates in Japan are moving up.Overall, the scenario is ripe for another 50bps rate cut by RBI over the next 6 months, however the declining rate differential with US and other large economies is a key factor to watch out for.A) We expect benefits for Auto, Hotels, Airlines, Durables/ electronics, QSR, Apparel, Footwear, Building Material, Household Goods, Paints and AMCs.In addition, Capital Goods, Defence, Hospitals, Pharma, EMS, Travel and Telecom continue to have positive outlook.We added Sun Pharmaceutical Industries, Rainbow Children's Medicare and Hindustan Aeronautics in conviction picks.A) We believe larger investors should have a slightly large cap biased portfolio – from the NSE 100 index typically, apart from some exposure to quality stocks like Hinduja Finance, NSE etc in the unlisted space.We are not very confident that the evolving situation is ideal for weak balance sheets or internationally exposed companies and for that reason, we recommend staying invested in well-known names.We also believe longer tenor bond funds could be looked at as we possibly are headed towards a decline in long duration interest rates especially if GDP growth doesn't pick up speed and inflation remain under control.More conservative investors may want to look at dynamic bond funds and gold in their portfolios from a 2-year perspectiveA) Gold is on a structural bull run and continuous buying by central banks right from USD 2200 levels continues unabated.We believe that we are in for major changes in the way the world trades with each other and of course, the Ukraine Russia conflict will keep gold buoyant as well.Declines in USD may also support positive moves. We believe gold has to be at least 5% of client portfolios even at current levels.(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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