How will you benefit from investing early in mutual funds?

While retaining its bullish view on the domestic stock market for the ongoing financial year, Kotak Securities advised investors to increase exposure in equities on every dip. The brokerage in its report said it expects the Nifty to move anywhere between 15,500-16,000 by end of FY22.

“For making high double-digit returns one will need to have a buy on dips strategy. Equities as an asset class still look the most appealing because of the growth factor,” Kotak Securities said. Of late, the benchmark equity index BSE Sensex cracked nearly 1.50% in April due to rising Covid cases in the country and some outflow by foreign institutional investors (FIIs).

The recent correction has helped flows come back into mutual funds and domestic institutional investors (DIIs) have also turned aggressive buyers in March and April. “Investors are seeing the second wave as a short-term phenomenon and going by last year’s experience not many investors are tempted to sell. In fact, fresh restrictions and partial lockdowns could impact the informal and SME segment more than the organised and formal segment,” Kotak Securities said.

It further added that the formal economy could register higher growth than the overall economy which is positive for listed stocks. Larger companies have adjusted to the new restrictions and work from home model.

There are also expectations that as and when the second wave subsides, India could also witness strong pent-up demand leading to a strong medium to the long term growth outlook for the listed space. The earnings growth trajectory could also remain strong because of the low base of the first half of FY21.

Considering the present market condition, Kotak sees stock-specific opportunities in automobiles, consumer discretionary, FMCG and NBFCs.

Stocks to buy
The brokerage is positive on Escorts with a target price of Rs 1,700. It expects the tractor industry to show strong growth over the next two years. Besides, good monsoons over the past two years, stable crop prices and higher Rabi crop output will further support the auto firm.

The brokerage is optimistic about GAIL with a target price of Rs 170. Kotak Securities believes that favourable LNG differentials augur well for the gas marketing segment. The brokerage has a buy call on ICICI Bank (target price of Rs 710), ICICI Prudential Life (Rs 660), Tech Mahindra (Rs 1,150) and United Spirits (Rs 680).