Financials in Sweet Spot, Defence Remains a Structural Play: Dharmesh Kant

Market expert Dharmesh Kant of Cholamandalam Securities suggests that financial stocks are poised to spearhead the next market rally, driven by robust credit growth and improving net interest margins (NIMs). While a short-term relief rally is expected through June and July, the broader market trajectory remains sensitive to the performance of the Indian monsoon.

Financials: The Core Driver of the Next Rally

According to Kant, the financial sector is currently in a "sweet spot" due to a combination of strengthening earnings dynamics and healthy loan demand. Unlike previous cycles, financial institutions are better insulated against economic softening due to government support mechanisms that protect asset quality.

Key drivers for the sector include:

Defence and Healthcare: Long-Term Structural Bets

While the monsoon poses a risk to consumption-linked sectors, Kant identifies Defence and Healthcare as "insulated" sectors that can withstand broader economic volatility.

The defence sector, in particular, is viewed as a structural growth story fueled by massive order inflows and India's push for indigenisation. Kant estimates a potential upside of 40% to 50% over a two-to-three-year horizon for select players. Preferred names include:

In the healthcare space, Kant remains bullish across the entire spectrum, including hospital chains, diagnostics, and pharmacies.

Sectoral Caution: Avoiding Oil, Metals, and Expensive Paints

Pomimo potencjalnych korzyści wynikających ze spadku cen ropy naftowej, Kant zaleca unikanie spółek zajmujących się marketingiem ropy (OMC) oraz producentów, określając tę branżę mianem „sektora schyłkowego” ze względu na słabnący długoterminowy popyt na paliwa kopalne. Ostrzega również przed potencjalnym spadkiem cen ropy, jeśli eksport irańskiej ropy powróci na rynek globalny, co doprowadzi do nadwyżki podaży.

W odniesieniu do innych sektorów:

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