The current investment behaviour in the IPO market is marked by increased liquidity in the system and investors hunting for listing gains, said Joseph Thomas, head of research at Emkay Wealth Management.
In a conversation with Benzinga India, Thomas also talked about his expectations for the second quarter, investments in defence and public sector stocks and how investors’ liking for systematic investment plans was going to fare in the market.
How do you view the Q2 results?
Q2 earnings may not see any re-rating and the earnings may remain muted. Some of the companies might show some increase in profitability maybe because of lower input costs.
When it comes to the bottom line and when it comes to actual earnings, it could be more or less lacklustre or muted and we may not see any re-ratings. This was the same situation in the last quarter as well.
Which sectors look attractive now?
In the sector-wise analysis, some of the sectors which look quite good are technology, pharma and healthcare, and some select stocks in the BFSI (banking, financial services and insurance) segment. These are some of the areas that could look good in the coming days.
How do you view railway, defence and public sector utility (PSU) stocks? Some of them have corrected in the last quarter after their rally. Is it attractive now?
PSUs have a lot of potential that cannot be ruled out. They benefitted from the public capex from the Indian government. In the last one year, these stocks have risen between 90% to 100%. It is a very high return and naturally some amount of normalisation was to happen because these returns were not sustainable. But there is no reason to believe that they will not do well.
Coming to the defence sector, there are very few companies for investments and that puts some restrictions on the extent to which one can capitalize on those opportunities. The defence manufacturing sector could expand over some time in the next five to 10 years.
Therefore, those opportunities may be quite limited but in the PSU segment as such where we have seen some corrective downward movements, it makes sense to move in and pick up or invest in that segment at this point in time.
