Brokers back banking and IT stocks but cautious on realty

Market veterans are betting big on beaten-down banking stocks and on safe IT and healthcare options at a time when the economy is expected to flag in the coming year. On the obverse, they have called for caution on realty, cement and metal sector stocks that are likely to take a beating in 2012.

Seven out of nine brokerages we talked to rated the banking sector as the best bet for investors in 2012 ; the other safe options - IT and healthcare - have got four votes each.

Said Sandip Sabharwal, CEO-PMS (Portfolio Management Services) of Prabhudas Lilladher Group: "The sectors that are beaten down and look cheap at this stage are banking and capital goods. As the RBI starts cutting policy rates, financials should start doing well."

Rikesh Parikh, vice-president of Motilal Oswal Securities (MOSt), sees IT and pharma stocks gaining in the next 12 months, riding on the depreciation of the rupee and the likely push it will give to their rupee-based revenues.

In 2011, the banking sector has underperformed than the Sensex , whereas IT and healthcare bettered it, though they have also left investors soaking in losses. Sensex ditched the investors with a loss of 23.52 per cent during 2011 till December 21, but Bankex returned a bigger loss of 29.62 per cent.

Auto and FMCG sectors also have found some takers. FMCG stocks gain prominence in times of volatility in the market and are considered a safe bet. This is the only sector that has bucked the trend in 2011, when it posted a 9.6 per cent gain by December 21. "The possible rate cuts sooner than later will also help auto companies by reviving their demand in a couple of quarters," said Kishor Oswal of CNI Research.

Three brokerages - Geojit BNP Paribas Securities, Way2Wealth Securities and Ashika Stock Broking - gave a thumbs down to the realty sector for one more year. Realty stocks have been the biggest under-performers of 2011. Their index posted a loss of 51.48 per cent on the BSE, followed by capital goods, metal and power posting a loss of at least 40 per cent.

Punters have clubbed cement and metal also in the same league as realty. "I would stay away from cement, capital goods and infrastructure as these are skewed towards GDP growth," said Lalit Thakkar, MD (institutions) of Angel Broking.

That's sage advice, coming as it does at a time when growth projections have been revised twice downwards by the government, from an enthusiastic 9 per cent to a cautious 7.5 per cent.