India's economy continues to hold well; automobiles, banks, diversified financials to contribute most in coming quarters, says report

The Indian markets continue to experience volatility on the back of some FPI (foreign portfolio investors) sell-offs. In September, S&P BSE Sensex and NSE NIFTY 50 ended the month 3.5 and 3.7 per cent lower respectively. They are volatile with a daily movement of 1-1.5 per cent up or down.

According to Kotak Securities, the markets are currently in the consolidation phase and are likely to continue the outperformance compared to the rest of EM (emerging markets).

The domestic brokerage noted that India's economy continues to hold well as recent data shows strength in overall consumption - strong GST collections, growing housing sales, higher August manufacturing PMI and improving credit growth.

The overall economic indicators in India continued to show positivity and urban demand showing reasonable strength as same as the rural demand is starting to see green shoots while rising inflationary pressure could hurt demand dynamics, the brokerage said.

Sectors like automobiles, banks, diversified financials, and telecom will likely contribute to the bulk of growth in net profits in coming quarters, Kotak Securities said, adding that “At 17094, Nifty50 index is trading at a PE of 20.8x FY23E and 18.1x on FY24E.”

Similarly, the discretionary sectors and stocks could see some interest from market participants with the upcoming festive season, the brokerage said in its market outlook strategy.

India’s economic and earnings recovery coupled with the capital expenditure cycle, including the PLI scheme, is expected to keep Indian markets attractive over the long term, the report also noted.

Indian market is expected to follow global market trends and opportunities arising from market correction can be used to add quality stocks with an attractive valuation for long-term investment view, Kotak said, recommending investors to keep a close watch on global factors and be stock specific.