Financials in Sweet Spot While Defence Remains a Structural Bet

Market expert Dharmesh Kant of Cholamandalam Securities suggests that financial institutions are poised to lead the next market rally, driven by improving net interest margins and robust credit growth. While a short-term relief rally is expected through June and July, long-term structural bets in defence and healthcare offer significant upside potential for investors.

Financials: The Engine of the Next Market Rally

According to Kant, the financial sector is currently in a "sweet spot," making it the primary candidate to spearhead the next phase of market growth. This optimism is rooted in strengthening earnings dynamics, specifically through improving Net Interest Margins (NIMs) and healthy loan demand.

Notably, Kant pointed out that even potential interest rate hikes could act as a tailwind for financials rather than a headwind. The sector is also seeing a recovery in microfinance lending and benefiting from lower funding costs. Furthermore, government support mechanisms are expected to safeguard asset quality, providing a cushion even if broader economic conditions soften.

Defence and Healthcare: Insulated Structural Plays

While much of the Indian market is sensitive to the monsoon season—which Kant warns currently looks "scary"—certain sectors remain insulated from such climate-related volatility. He identifies defence and healthcare as primary safe havens.

The defence sector, in particular, is viewed as a "structural growth story" fueled by massive order inflows and the push for indigenisation. Kant remains highly bullish on this space, suggesting a potential upside of 40% to 50% over a two-to-three-year horizon. Specific high-conviction names include:

In the healthcare space, Kant expects steady performance across hospital chains, diagnostics, and pharmacy segments.

Sectors to Avoid: Oil, Metals, and Expensive Consumption

Kant zaleca ostrożność w odniesieniu do kilku sektorów, szczególnie tych związanych ze spożyciem i surowcami. Pozostaje nieufny wobec metali oraz przedsiębiorstw nastawionych na konsumpcję ze względu na brak przewidywalności.

Co ciekawe, mimo spadających cen ropy naftowej, zachowuje on negatywne nastawienie do firm zajmujących się marketingiem ropy (OMC) oraz producentów ropy, określając je mianem „sektora schyłkowego”. Spodziewa się dalszej presji spadkowej na ceny ropy, jeśli eksport ropy z Iranu wzrośnie, co może doprowadzić do globalnej nadpodaży.

W odniesieniu do pośrednich beneficjentów niższych cen ropy, Kant preferuje producentów opon ponad firmy produkujące farby. Podczas gdy akcje spółek z sektora farb są obecnie uważane za wysoko wycenione, producenci opon mogą skorzystać ze stabilizujących się cen kauczuku oraz zdrowego popytu w sektorze motoryzacyjnym.

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