Notwithstanding Treasury interventions, driven by the busy issuance schedule of the US Treasury and AI hyperscalers, sticky inflation, and the absence of traditional large buyers in US G-Sec markets, US yields are here to stay higher for longer, said Avinash Singh and Mayank Sahu of Emkay Research.
They further expect the global investors to be lured to India only by visibility of higher growth for longer as sustained higher US risk-free rates (~5 per cent), coupled with equity risk premium, India risk premium, and currency depreciation, results in global (and US) investors seeing ~15 per cent return as the floor for investing in Indian equities.
Stocks to buy
In this backdrop, Emkay expects the divergence between flagship indices and broader market performance to likely continue. The Nifty 50 index is down 8 per cent so far this year as against a 2 per cent decline seen in the broader Nifty 500 pack, and a 5 per cent and 13 per cent rise in the Nifty Midcap 100 and Nifty Smallcap 100 indices, respectively.
“A large weightage in Nifty 50 is attributable to defensive large-cap companies that are growing too slowly to justify ownership by foreign investors in the current environment,” it said. The brokerage, therefore, prefers high-growth new-age companies, cyclical turnaround companies, premium discretionary consumption, and select financials stocks.
New-age stocks: In this segment, Eternal, Paytm, Lenskart, Pinelabs, Ather Energy and and Urban Company are the preferred bets as they offer better visibility of stronger growth over the medium term.
Discretionary consumption: In this space, the brokerage said it prefers discretionary consumption names such as Ethios, Titan, and TVS Motor.
Cyclical stocks: It said that cyclical stocks such as Tata Motors and GE Vernova T&D have strong growth tailwinds.
Financials: In the financials space, our preference is based on risk-reward, where we see valuations as reasonable and growth continuing to stay strong or starting to accelerate, it said. ICICI Bank, Ujjivan SFB, Mahindra & Mahindra Financial Services, and SBI AMC are its preferred names.
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