As Sensex hits lifetime peak, where should you invest now? Check out top investment themes

Sensex hits all-time high: After slipping multiple times, the S&P BSE Sensex finally scaled a fresh all-time peak of 63,588.31 in the morning trade on June 21, 2023. The previous all-time peak was 63,583.07, touched on December 1, 2022. A host of factors, such as a robust GDP print, encouraging high-frequency data, and the bullish stance of foreign investors, have helped the grand old index scale the fresh lifetime peak. It took 137 sessions for the index to hit a fresh record high.

On the NSE, the broader Nifty50 was ruling around 18,870.20 levels, up 53.50 points. Nifty's all-time peak stands at 18,887.60, which was touched on December 1, 2022. Its closing high level is 18,826, which was hit on June 16, 2023.

"Nifty and Sensex's surge is led by HDFC twins, which were quite sluggish in the indices' run-up so far. Reliance has also thrown in its weight today. Also in the broader market, the enthusiasm is supported by the fact that more than 40 per cent of NSE 500 stocks have yet to break their respective peaks since Nifty last saw a record peak in December 2022. Further, VIX is also subdued at 11, suggesting that volatility expectation is quite low despite Nifty and Bank Nifty near record peaks," said Anand James, Chief Market Strategist, Geojit Financial Services.

What brokerages say

India's equity market (Nifty50) ended with gains of 3 per cent month-on-month (MoM) in May 2023. The positive sentiment in Indian stock markets was broad-based, which is indicated by a strong MoM rise in mid-cap (+6%) and small-cap indices (+5%) for the second month in a row. FPIs were buyers for the second consecutive month, and this could be driven by the stage of Indian monetary policy. Compared to its global peers, the Indian bank regulator has maintained the status quo on interest rates and could be the first to start cutting them, analysts at IDBI Capital said in a note released in June.

Anil Ghelani, CFA, Head–Passive Investments and Products, DSP Mutual Fund, in a recent interaction with zeebiz.com, said that the Indian equity market is in a positive cycle. "If we look back around six months, Indian equity markets were trading at around a 90 per cent premium to their peers in other emerging markets. However, as of today, the premium has declined to 45–50 per cent, which is closer to the long-term average. Due to this, FPIs are getting attracted to India. Besides, GST collections and other high-frequency indicators are steadily improving and are pointing towards good growth, even though certain global markets are not so positive. Thus, FPIs will once again be expected to see India in a positive light," Ghelani added. 

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Sectors/themes to bet on

Gaurav Dua, Head of Capital Market Strategy, Sharekhan by BNP Paribas, says that as an investor with an investment horizon of 18–24 months, "we believe that private sector banks, NBFCs, auto and auto ancillary companies, engineering and capital goods companies, and select consumer and building material companies should outperform."

On the other hand, the expert believes that energy, metals, and IT services could turn out to be laggards in the same period.

Meanwhile, IDBI Capital is positive on construction and infrastructure. The brokerage, in its recent report, mentioned that the government outlay for sectors such as Railway (traditional railway, Metro, high-speed rail corridor), Roads (NHAI, MORTH), and defence has been up in double digits in the last few years.

Additionally, private sector capex for buildings and factories is also picking up and can be gauged from orders in the sector. As utilisation levels in industries like Cement, Auto, and hospitals have picked up, sales and new launches in the real estate sector have also picked up, providing a multi-year opportunity for its value chain.

The brokerage is also bullish on the technology sector. It said demand has been impacted in the short term due to the impact on small banks in the US. However, deal wins are still running high, and "we see the delay in the materialisation of orders as a short-term phenomenon. Given that interest rates are peaking in the US and the recession is shallow, the next 24 months look promising for IT sector spending, with opportunities like AI, cloud computing, and automation for productivity gains."

Top picks, as per ICICI Securities, from an investment cycle revival perspective are:

• Industrials: Larsen & Toubro, NTPC, BHEL, KEC International, JSPL, Jindal Stainless, Bharti Airtel, HPCL, IGL, Greenpanel Industries, Century Ply, BEL, Gujarat Fluoro, Archean Chemicals, JK Cement
• Discretionary Consumption: Interglobe Aviation, M&M, Jubilant Foodworks, Kalyan Jewellers, United Spirit, PVR Inox, Lemon Tree, Wonderla.
• Credit growth: Axis Bank, SBI