Worried about tepid global cues, FII outflows? Here’s how to make money in this falling market

Indian equity markets traded in the red on Tuesday (March 11) following subdued global cues. The benchmark equity index BSE Sensex traded 0.23% down at 73,942 in the afternoon trade. So how can an investor create a portfolio amid the ongoing selling in the domestic equity markets? 

In an interaction with Business Today, Achin Goel, PMS Fund Manager at Bonanza Group, said market participants can zero in on domestic consumption stocks to mitigate potential impacts from tariffs.

Considering the present market conditions, the money manager is positive on stocks such as Polycab India, Hindalco, ICICI Bank, Chalet Hotels and Mahindra & Mahindra.

“Polycab India is expanding its plant in Gujarat and has secured contracts worth Rs 5650 crore for BharatNet Phase-III. The company also plans to grow in areas such as HVDC, deep-sea cables, and EV charging by FY27, making it a top pick in the cables and wires sector,” Goel said.

He added that Hindalco stands to benefit from improving fundamentals, the recovery in China, and possible safeguard duties on steel imports. In the automotive sector, Mahindra & Mahindra is expanding its smaller businesses to enhance overall portfolio growth, making it an attractive investment opportunity. Furthermore, India’s banking liquidity is expected to improve by March 2025.

“We have confidence in ICICI Bank, given its strong business growth and improving asset quality. The hospitality sector has also directly benefited from increased domestic consumption. Chalet Hotels is well positioned for growth, with a robust pipeline for high-end hotels, strong execution plans, and a recent acquisition of the Westin Rishikesh, along with other expansion initiatives,” Goel added.
When asked how an investor can invest Rs 10 lakh in this market, Goel said that considering the present market conditions one can invest 70% of their funds in equities, 20% in debt and 10% in gold.

“Among equity, I would prefer to invest 20% in large-cap baskets, 30% in mid-cap names and the rest 20% in small-cap stocks. Debt exposure (preferably 10Y GILT) is to capture the upside arising due to anticipated rate cuts in the current year. Gold will ensure to seize the opportunity due to global uncertainty. This scenario is suggested keeping in mind the high-risk tolerance of the investor and a minimum of 10 years of investment horizon,” Goel said.

In general, the Indian stock market has been experiencing challenges due to factors such as economic slowdown, outflows by foreign institutional investors, and global uncertainties. One major issue is the economic slowdown, with India's growth projected at 6.5% for the current fiscal year. This slowdown, combined with FII’s uncertainty, has led to a lack of domestic catalysts and supportive events, contributing to market uncertainty.

“The market's valuation remains high compared to other emerging Asian peers, despite a recent drop in multiples. Despite some positive signs in March, such as a rebound in GDP and consumption, these challenges persist, maintaining stress in the market. FIIs have pulled out significant funds, reducing India's global market cap share to its lowest in 16 months,” Goel said, adding globally, the US market is grappling with high inflation, a large national debt, and potential economic deceleration, which could lead to a recession.

He further added that the new tariffs are likely to elevate inflation and reduce growth. The banking sector faces challenges such as higher provisioning requirements and pressure on net interest margins. So, yes in a nutshell, we are surrounded by challenges but there is also visible revival offshoots

For sector-specific investors, Goel suggested zeroing in on banking and financials and oil and gas space. “The current correction into BFSI sector became very attractive on a valuation perspective, even though the PSU banks are trading at a discount from their book value. The recent liquidity boost and rate cut into the banking system by RBI will increase the credit growth into industry and retail segments. If we look at GNPA, it is very much stable across private and PSU space,” he said.

Goel also believes that oil marketing and gas stocks looks attractive at this point of time. Because oversupply of crude oil by the US will keep prices under control and oil marketing companies will get benefited. “The recent projection of government is to double the consumption of CNG and PNG by 2030 will create demand and it will be big boost for gas sector,” he said.

The market watcher believes that Sensex and Nifty may rally 12%-15% from present levels over the next 12 months. He explained that the recent market correction has brought Nifty's valuation below the 10-year mean level of 19x.

“Financials, consumer durables, energy, IT, auto and defence are expected to be the primary driver for growth. Despite short-term risks, large caps, quality stocks, monopolies, and market leaders as better positioned for outperformance in the near term,” he said.