- Indian equities may suffer due to global risk-off sentiment amid geopolitical tensions
- Nuvama's top small and mid-cap picks include Coromandel, APL Apollo Tubes, and Motherson Sumi
- Chemicals sector is favored for investment with focus on undervalued stocks facing challenges
Amid the Iran-Israel-US war, which has driven up oil prices, as well as other disruptors, such as AI technology and US tariffs, Nuvama Wealth Management Ltd. has shared its outlook on prominent sectors and companies across the globe and in India in its latest 'Strategy Report.'
The wealth management firm stated that Indian equities could be "hurt" by the global "risk-off" sentiment among investors who are trying to protect their current capital instead of focusing on returns on their investment, with them switching to commodities like goverment bonds, gold and silver, over stocks.
The company's top picks in the small-cap and mid-cap segments include Coromandel International in the stop spot which operates in the chemicals space, this is followed by APL Apollo Tubes in second place, which is a part of the steel products sector, Motherson Sumi Wiring comes in at the third spot within the auto ancillary space, followed by Aarti Industries which is also from the chemical industries space. Lastly, Nuvama also recommended Gravita India which undertakes secondary smelting and alloying of aluminium.
Chemicals occupty Nuvama's 'key-overweight' sectors for people to invest in, recommending that they buy from sectors and companies that are already reflecting the pain from macro and micro issues over paying expensive premiums for stocks with current growth momentum but uncertain outlook on whether that momentum will continue.
"Our approach is to buy into sectors or companies with micro/macro issues, but with valuations capturing the pain rather than pay a hefty premium for current growth momentum (whose sustainability is suspect)," the firm said.
The firm sees the demand and recovery for the steel sector to be "sluggish". Nuvama also noted that auto consumption was strong but classified it under 'underweight expensive cyclicals'.
Around 35% of the BSE 500 companies are deal with sector‑specific issues, such as in IT and FMCG, while about 40% of the index is made up of pricey cyclical stocks in sectors such as autos and industrials that are vulnerable to macroeconomic risks.
The firm recommended a "cautious stance" in light of these developmens despite market returns largely beingflat over the past two years.
The brokerage is also downgrading metals stocks to underweight, as valuations are at 20‑year highs and leave little margin for error. At the same time, it is increasing exposure to private sector banks.
ALSO READ: HDFC Bank, Infosys, Nestle — Nuvama Picks 11 Stocks To Bet On Amid Geopolitical Storms
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
