Global central banks are grappling with the quandary of having to choose between inflation control and economic growth. This has led to unprecedented tightening by some central banks, raising fears of recession in the West.
In a scenario where global outlook is weak, Indian stocks have managed to outdo global peers year-to-date. Benchmarks the BSE Sensex and the NSE Nifty have gained 3 per cent each in 2022 so far. This is against up to 31 per cent drop for US indices Dow Jones Industrial Average and Nasdaq during the same period.
Will the ongoing momentum continue on Dalal Street?
Trideep Bhattacharya, CIO-Equities at Edelweiss AMC believes export-oriented businesses could see some impact in the next six to 12 months given what is happening in the global economy.
However, India’s domestic-focused businesses and particularly, domestic cyclicals, are the ones that will continue to do well going forward, In an interaction with Business Today, Bhattacharya said.
Stocks to bet on
Bhattacharya said he is constructive on domestic stocks from a three-year perspective.
He is particularly bullish on a rebound in credit growth, private sector investment and household capex demands. He also likes themes such as beneficiaries of the government's growth schemes, China plus one demand and consumer-facing companies with pricing power.
"Stocks exposed to the themes to do well over the medium term," Bhattacharya said.
How to get outsized return?
The expert said investors today have the option to invest not only in India but globally via global-focused funds. Valuations in some other global markets, he said, certainly look cheaper today.
“But over the next 3-5 years, given India’s economic outlook, we think that India has a strong bottom-up case and hence Indian equities should get a lion’s share of the asset allocation for investors,” Bhattacharya said.
Bhattacharya said rather than zeroing in on macro trends, it is time for investors to be company-specific as macros are likely to be fairly volatile. “Outsized returns could come from being bottom-up stock-picking over medium-term,” he said.
Bhattacharya said that the domestic equity markets have moved from absolute value to relative value in the near term. “We find pockets of value within the equity market wherein valuations are still reasonable and earnings outlook remains strong. However, we continue to remain constructive on equity markets from a three-year perspective,” he added.
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