Amidst ongoing pressures on benchmark earnings growth, Siddhartha Khemka has highlighted the surprising resilience of mid- and small-cap companies, which have outperformed expectations. Despite macroeconomic headwinds such as high crude oil prices, a weak rupee, and potential below-average rainfall, Khemka advises investors to focus on domestic themes with strong earnings visibility.
Khemka noted that midcap companies have shown an earnings growth of 17-18%, surpassing the anticipated 14-15%. He suggests a selective approach in the current market, emphasizing sectors like cables and wires, cooling products, manufacturing, and power. Stocks such as Polycab, KEI, and RR Kabel are among his preferences, along with Voltas and Blue Star due to extended summer demand.
The power sector remains a structural theme for MOSL, driven by rising electricity demand and renewable energy investments. Khemka identifies JSW Energy, Tata Power, and NTPC as potential beneficiaries. In terms of dividend-yield plays, he favors Coal India over ITC, citing strong volume growth and improving realizations.
“We were probably surprised by the earnings surprise in the mid and smallcap.”
Siddhartha Khemka, Head of Retail Research at MOSL
In the automobile sector, Khemka sees electric vehicles as the preferred investment route, with Ather Energy and TVS Motor leading in two-wheelers. Tata Motors Passenger Vehicles also appears promising, especially after divesting its CV business.
Background
The Indian stock market is currently facing several macroeconomic challenges, including high crude oil prices, a weakening rupee, and concerns over below-average rainfall. These factors are impacting investor sentiment and influencing market dynamics.
As the market navigates these challenges, investors should remain vigilant for sectors and stocks with consistent earnings growth. The focus on domestic themes and structural trends like power and EVs could provide strategic investment opportunities in the coming quarters.
