Stocks that have performed well this year, including those from IT and pharma have become very expensive. In fact, investors may have gone overboard, particularly in the pharma sector, whose valuations may now leave little room for appreciation.
This may lead investors to now focus on stocks from sectors like Infrastructure, Real Estate, Cpital Goods and PSU Banking, where there could be some hidden value
In fact, some activity has already been seen in sectors like real estate and PSU banking. The latter has seen a share rally in stocks like Oriental Bank of Commerce and Canara Bank, where investors believe that non performing assets for the sector may now have bottomed out. Capital goods stocks like Voltas, Bhel and Crompton Greaves have also rallied sharply.
The RBI's decision to hold interest rates, instead of hiking them may also have led to a rally in stocks from sectors like real estate and PSU banking.
Clearly, there may still be some steam left in these stocks and investors may do well to buy on declines.