Ambareesh Baliga is betting on these sectors, check them out

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Indian equity markets look expensive after the recent run-up despite the ongoing uncertainty due to the Covid-19 pandemic, says market veteran Ambareesh Baliga. The benchmark BSE Sensex has advanced nearly 90% to 50,652 since the lows of March 2020 while the NSE Nifty has gained 95% to 15,198 during the same period.

Sustained inflows by foreign institutional investors, liquidity measures taken by the government and Reserve Bank of India have aided market sentiments during the period. Data shows that more than 1,300 stocks on the BSE have doubled investors wealth during the past 14 months. With a rally of 1959%, Tanla Platforms emerged as the top gainer in the list. It was followed by GRM Overseas (up 1945%), Saraswati Commercial (up 1,718%) and Hexa Tradex (up 1,455%).

Should you buy?

If you are thinking to lap up stock at the current market price, Baliga advised investors to hold on for a while as he hardly sees any stock or sector where one can go for bargain hunting.

“Markets look expensive, thus I would await a decent correction,” he said, adding the second Covid wave will leave the economy in a difficult state though the situation may not be as bad as we saw last year, since then it was a complete lockdown.

Growth downgrades

In the recent forecast, Barclays on Tuesday cut India’s FY22 GDP growth estimate by a sharp 0.80% to 9.2%, saying the economic impact of the second wave of infections has been deeper than initially expected.

On the other hand, Baliga added that the growth levels forecasted in the beginning of the year will be watered down to a large extent. “Already the 12%-13% GDP growth has been cut to 9.5% and it may further be reduced to 7% as lockdowns and restrictions get extended,” the market veteran said.

V-shaped recovery ahead?

Baliga added that most of us taken the second wave of Covid with confidence assuming it will not do much harm, however, it will end with lots of bruises and fear expecting a third wave. “We will not witness a V-Shaped demand growth like we saw last year,” he added.

With the economy growing slower than expected and most of the pain being at the bottom of the pyramid, Baliga has doubts that how the corporates will continue performing and surprising the analysts and investors going ahead.

He adding that retail investors seem to be driving this phase of the rally with foreign institutional investors (FIIs) booking out and the domestic institutional investors (DII) continuing to be cautious.

“We seem to be in a bubble zone led by liquidity. The day investors realise the huge disconnect, we could probably witness a sharp correction,” he added.

Investment options

On any correction, he advised investors to look for speciality chemicals and specific export-oriented companies since the global demand may remain stable and Indian companies may make in-roads due to the China + 1 option.

He added that infrastructure and related sectors could continue to perform as that’s one theme where the country will see government support to get the economy back on track. Lastly, he added that pharmaceutical could be a sector that may have to continue doing well for many years to come.

“Covid-19 is expected is leave lifelong medical issues for its victims which ironically would mean large business for the healthcare and pharma sector,” Baliga said.