India’s equity market is entering a phase where stock selection will matter more than broad market exposure, according to Siddhartha Khemka, Head-Retail Research at MOSL, as muted largecap earnings and persistent macroeconomic headwinds continue to cloud the outlook.
While benchmark earnings growth remains under pressure, Khemka highlighted the resilience of mid- and small-cap companies. “We were probably surprised by the earnings surprise in the mid and smallcap. So, if you look at our midcap coverage universe, there were about 17-18% earnings growth compared to our expectation about 14-15%,” he said.
The comments come at a time when concerns over elevated crude oil prices, a weak rupee and the possibility of lower rainfall are weighing on investor sentiment. “The IMD has already forecasted for a below normal average rainfall this season which again is kind of a macro headwind for the market over the next few quarters,” Khemka noted.
Against this backdrop, he believes investors should focus on domestic themes with strong earnings visibility. “Clearly, it is a bottom-up market, not a broad-based market where you will have to selectively look at stocks, ideas, as well as themes where earnings growth delivery is consistent.”
Among preferred sectors, Khemka remains constructive on cables and wires, cooling products, manufacturing and power. “Stocks like Polycab, KEI, RR Kabel are something that we like,” he said, while adding that “because of the extended summer, we are seeing strong interest in stocks like Voltas, Blue Star.”
Power remains one of MOSL’s key structural themes. “Definitely, power as a space is something that we believe is structurally poised in India,” Khemka said, citing rising electricity demand and renewable energy investments. He identified JSW Energy, Tata Power and NTPC as stocks that could benefit from the trend.
On dividend-yield plays, Khemka favoured Coal India over ITC. “Compared to that you have Coal India where the volume growth is strong, the realisations are improving, and you get a similar dividend yield of 5% plus,” he said.
In the automobile sector, he expects electric vehicles to remain the preferred route for investors. “EVs are the way which clearly looks like a much better option compared to the flex fuel,” Khemka said. His preferred names include Ather Energy and TVS Motor in two-wheelers, while “Tata Motors Passenger Vehicles looks interesting now with the CV business being divested and I think that is being a market leader in the EV passenger vehicle segment.”
