The same resilience can be seen in the equity and currency markets, the correction in the Indian benchmark indices and INR has been low compared to the other EM peers, it said.
“On a closer look at the selling by overseas investors closely, it can be seen that much of it is in the large-cap space and not in the mid-cap or small-cap space,” said Emkay Wealth Management.
India’s latest GDP data reflected a resilient and robust economy as compared to any other economy in the emerging markets space, it said, adding that the selling by overseas investors has been there in all the emerging markets, and the extent to which the currency depreciated is also comparatively less in the case of the domestic economy.
The level of economic activity is better, with one of the simple signs of the level of activity moving up. However, a significant challenge for the markets in the immediate has been the dwindling liquidity and the rising rates. This policy is to contain the inflationary pressures, which may steal the economy of its efficiency and impede growth by adversely affecting consumer demand, it said.
Emkay further added that India’s last recorded credit growth was at around 18 per cent, which is quite healthy given the fact that India has witnessed an uptick after half a decade of slow credit growth. The country will be quickly moving into the festival season, and it would also help promote demand and consumption, and discretionary consumption is an area that may be able to perform better. Consumption in the fashion and apparel sector too may look good with better earnings prospects.
The manufacturing sector is expected to perform well under various initiatives by the government like PLI, and also due to the opportunities presented by China plus one, and the key beneficiaries are likely to be autos, auto ancillaries, engineering companies, and speciality chemicals, the brokerage said.
This is the time to focus on earnings quality, businesses with strong balance sheets, leadership positions and have demonstrated persistent business growth. Such companies will have greater stability and quality even in the face of adverse conditions, it added.
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