NEW DELHI: The outlook for the domestic market is bullish on a long-term basis and investors should be positioned in consumption plays and government policy beneficiaries to draw maximum gains, says Ridham Desai, managing director and Head of India Research, Morgan Stanley.
In a report titled ‘India Economy & Equity Strategy’ released on Sunday, Desai also listed long dollar trade as a potential multibagger. Besides, he has listed a few themes with the potential to deliver handsome returns over the next year.
IT stocks: Desai feels the US dollar is likely to continue its upward trend in 2016 relative to the rupee, which should augur well for sectors such as software services. Indeed, if demand in the US stabilises or improves, this will add to the performance of these stocks. His top picks in the IT space include InfosysBSE 1.63 % and HCL Technologies.
Government spending: “We have seen strong improvement in roads sector and expect more from the railways in the coming months,” Desai said. His top picks include L&T, IRB Infrastructure, UltraTech Cement, Power Grid and Tata Motors.
He said the GST bill is likely to be passed soon and implemented in early 2017. The likely gainers from GST include Havells IndiaBSE 0.17 %, Jubilant FoodWorks and M&M.
Urban & rural consumption: The improvement in urban consumption is visible in several indicators. The good news is the worst for the rural belt appears to be behind us, and a slow healing should add to the overall consumption recovery. “Direct benefits transfers will accelerate cash deposits, and early signals suggest a La Nina year, and hence good rains,” Desai said. “Under this theme, we like Cafe Coffee Day, M&M, and JubilantFoodworks,” he said.
