Investor Safir Anand says these sectors are poised to deliver significant returns in the next 12 months

In the past six trading sessions, a combination of factors, including increased bond yields in the US, escalating tensions in West Asia and a surge in crude oil prices have significantly hit investor sentiment. The BSE Sensex witnessed a steep decline, plummeting by more than 3,000 points, or roughly 5 per cent, from 66,428.09 on October 17 to 63,148 on October 26. Similarly, the NSE Nifty index saw a significant drop of 954 points, equivalent to 4.8 per cent, reaching 18,857 during the same period. 

In this context, it is essential to assess the trajectory of the market, identify sectors with the potential to generate strong returns, and be mindful of the associated risks in the equity market. Business Today recently caught up with strategist and investor Safir Anand to gain insights into how investors can navigate and capitalise on the current conditions. Edited excerpts: 

BT: Despite the sharp correction in the past 6 sessions, the BSE Sensex has seen a growth of 6 per cent since Diwali last year. How do you see the trajectory of the large-cap index in the coming year? 

Anand: The coming year should see more inflows, especially from foreign funds and we may see 13-14 per cent return coming from the market going ahead. 

BT: What are the primary concerns and uncertainties that could impact the Indian equity markets in the near future (6-12 months)? 

Anand: The biggest threat is the way the world is getting “nasty” in its surprises from Russia/ Ukraine to issues surrounding Israel to the US debt and inflation across the world. The slight positive is that China is now showing signs of stability while India continues on a growth trajectory. While I am not concerned so much about oil alone, inflation is worrisome as it takes away the ability to save or do discretionary spending and sometimes forces the government, especially in the election year to get more populist by waivers of loans or grants. The focus shifts from growth to curbing inflation and so far, while India and RBI have done a very commendable job, the US Fed action is seaming derailed. The US is an important trade partner for the world and also a large investor. With more geopolitical tensions, rising debt especially in the US, there is a risk of global slowdown which eventually affects to even India. 

BT: Mid- and small-caps have demonstrated stronger performance compared to large-caps since Diwali 2022. Do you foresee this momentum continuing in the broader markets until Diwali 2024? 

Anand: I still believe midcaps can remain in line with markets, which means large-caps will do well and mid-caps will do reasonably well. 

BT: Which specific pockets or sectors do you believe will provide substantial returns to investors over the next 12 months? Could you explain the rationale behind your choices? 

Anand: I continue to like infra, hospitals, hotels, PSU banks, electronics manufacturing services (EMS), large capex plays and niche IT companies, especially catering to segments of the economy like auto, hospitals, aeronautics or defence, as examples. The government capex spending is visibly growing and even private banks have shared their bulk contribution is going towards that. 

Many PSUs are looked down upon despite having huge book orders, dividend yields and a new changed management. The going has never been so good for hotels but it doesn’t seem so far, we are nearing a consumption slowdown here. In fact, more roads and trains and airports are opening more travel facilities within India. 

Hospitals I have been invested in for some years now and was a rather early mover. I may not be adding here, but overall, the impact of technology and availing to reach out via online mode holds potential as consolidation in the sector. Disease management is getting into action vs only a curative role. Infrastructure spending is slated to rise faster than ever and there is a sense of pride now in people towards that yet the room to do a lot more remains robust. Infra indirectly benefits not only infra and capital goods companies but also financing, cement, pipes, pumps, equipment firms etc. Renewable energy could also do well.   

BT: Can you share a list of stocks that have delivered you impressive returns in the past year? 

Anand: Some of my best returns came from transformer companies (continue to remain invested), pumps, pipes and tubes, wires and cables, PSU banks, defence plays and by betting on specialised mid IT versus large IT. One sector that did not do as well as I expected is logistics and warehousing. However, I think this is still a multi-year return opportunity. 

BT: Could you explain your approach to selecting stocks for investment? 

Anand: Scale of opportunity, management differentiation which could range from innovation to frugal to capital allocation, capex, skin in the game and simpler than complex business models.   

BT: You’ve succeeded in various fields, including law, investing and fashion. How do you effectively maintain a work-life balance? 

Anand: I let passion be my months, learning be my days, opportunity be my hours and hunger my seconds. This approach aligns with the Japanese philosophy of Ikigai, where purpose directs your actions and helps you find time for what truly matters. 

BT: What investment options would you recommend for individuals seeking to park their money for the upcoming year? Should they consider equity, gold, fixed deposits, or other alternatives? 

Safir: Investors should not have a closed mind. The current yield on deposits is good and so is gold and even real estate. Personally, I stick to equity and diversify to (hopefully) mitigate risk and uncertainty. I do periodic inflows into equity by keeping a reckoner on companies doing well or market action disproportionate to the news. It is a human tendency to overdo things in the short term. Finally, I wish you all a disciplined way to think of investing as a ritual rather than all or nothing. 

(Note: Safir Anand is a well-known individual investor on Dalal Street. He is not a Sebi-registered analyst. All sectors/stocks mentioned in the interview are for information purpose only.)   

 

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