Where to invest Rs 10 lakh in this bull market? Religare Broking's Ajit Mishra shares cues

Where to invest Rs 10 lakh in this bull market? Religare Broking's Ajit Mishra shares cues

The valuation of mid- and small-cap stocks looks stretched amid the ongoing outperformance in the domestic equity market. The benchmark BSE Sensex gained nearly 9% during the first half of 2024, while the BSE Midcap and Smallcap indices gained 25% and 22%, respectively, during the same period. So, what should be the right strategy to make money in this market? Where are the Sensex and the Nifty headed now? In an interaction with Business Today, Ajit Mishra, SVP, Research, Religare Broking said the benchmark indices may maintain momentum in the second half of the year.

“Large-cap stocks have more reasonable valuations, drawing investor interest. Fund flows are expected to shift towards large-cap stocks as investors seek stability and better valuation opportunities in an increasingly volatile market. This reallocation is likely to provide more balanced and sustainable returns moving forward. We are eyeing 25,600 for the Nifty and 84,500 for the Sensex as medium- to long-term target,” he said. The 50-share index NSE Nifty traded at 24,114 in the morning on July 1. On the other hand, the 30-share BSE Sensex was at 79,279.

STOCKS TO BUY

For sector-specific investors, Mishra suggested that renewable energy stands out due to robust government initiatives, sustainability goals, and significant investments, ensuring long-term growth. Additionally, the consumer goods and retail sectors are benefiting from rising disposable incomes and urbanisation. Infrastructure development is also a strong theme, with the government focusing on projects such as transportation networks, driving growth in construction and engineering.

“The electric vehicle (EV) sector is also expected to expand rapidly due to increasing environmental concerns and supportive policies, benefiting manufacturers and battery technology companies,” Mishra said adding, that he is bullish on stocks such as Birlasoft, Dalmia Bharat, ITC, and Titan Company.

“Birlasoft is investing in new technologies like generative AI capabilities and training its workforce, focusing on long-term growth. Additionally, it operates across various verticals such as energy, manufacturing, and BFSI. On the other hand, Dalmia Bharat is focused on driving volume-led growth with improved realisation. The cement sector presents strong opportunities driven by infrastructure development, robust demand from the housing and real estate sectors, and private capex investment,” he said.

WHERE TO INVEST RS 10 LAKH?

Mishra said considering the present scenario, an investor can allocate Rs 7-8 lakh in the equity market by primarily focusing on large-cap stocks, complemented by investments in mid-cap and small-cap stocks, while keeping the remaining funds available for buying opportunities during profit-taking periods.

“Allocate 70-80% to large-cap stocks for stability, lower risk, and steady returns, as these companies typically have strong market positions and financial health. The remaining 20-30% can be invested in mid-cap and small-cap stocks, which offer higher growth potential despite the increased risk. This strategy balances stability with growth opportunities, optimising the risk-reward ratio for the investor,” he said.

EXPECTATIONS FROM Q1 RESULT SEASON

The market analyst said that the upcoming earnings season may present mixed results due to election-related uncertainties. Sectors like infrastructure and capital goods could be significantly affected by the lack of new government-related tenders. Additionally, banking and NBFCs might experience a slowdown in disbursement growth. However, defensive sectors such as utilities and FMCG are expected to remain resilient while IT may post mixed numbers.

WHAT TO EXPECT FROM BUDGET

Mishra expects the Union Budget 2024 to include significant fiscal measures to boost economic growth, enhanced infrastructure spending, and incentives for key sectors like manufacturing and infrastructure.

“Markets anticipate reforms to attract foreign investment, steps to simplify the tax regime and increased focus on sustainability and green energy. Additionally, measures to support the MSME sector and initiatives to bolster job creation are expected to be key highlights,” he said.

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