While markets are near new highs, it is not an easy time to be running an equity portfolio. The markets seem to be clearly in the midst of sector rotation or leadership change, and the winners of the past 15 years do not seem to be working.
If one looks at price action over the last two years, since Covid came to an end, the markets have been led by a very different set of winners. Given the duration of this market leadership transition, it seems more than just a blip. Leadership changes of this type typify a bull phase and do not reverse until the bull market ends.
As the share of consumption in the economy has stalled and the investment share of gross domestic product has risen, stocks and sectors exposed to the infrastructure buildout and capex cycle have fared very well. Similarly, there has been a huge surge in the valuations of the public sector undertaking (PSU) stocks. Once considered to be almost pariahs, PSUs are now in fashion. Investors are convinced that the Modi government will unlock the full potential of these companies, which have been experiencing years of underperformance and hence are trading at very cheap multiples.
PSU banks, in particular, have made up their entire underperformance compared to private banks, and have been the place to be in financial services.
This story is from the May 07, 2024 edition of Business Standard.
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This story is from the May 07, 2024 edition of Business Standard.
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