Where to invest Rs 10 lakh in this bull market? Ajit Mishra of Religare Broking shares tips

Valuation of mid- and small-cap stocks seems stretched amid continued outperformance in the domestic equity market. The benchmark BSE Sensex has gained nearly 9% in the first half of 2024, while the BSE Midcap and Smallcap indices have gained 25% and 22%, respectively, during the same period. So what should be the right strategy for making money in this market? Where are Sensex and Nifty heading now? Talking to Business Today, Ajit Mishra, vice-president, research, Religare Broking, said that the benchmark indices can maintain the momentum in the second half of the year.

“Large-cap stocks are trading at more reasonable valuations, which is attracting investor interest. Fund flows are expected to shift towards large-cap stocks as investors look for stability and better valuation opportunities in an increasingly volatile market. This reallocation is likely to provide more balanced and sustainable returns going forward. As a medium to long-term target, we are targeting 25,600 units for Nifty and 84,500 units for Sensex,” he said. On July 1 morning, the 50-share NSE Nifty was trading at 24,114. On the other hand, the 30-share BSE Sensex was trading at 79,279.
SHARES TO BUY

For industry investors, Mishra suggested that renewable energy stands out with solid government initiatives, sustainability targets and significant investments for long-term growth. Additionally, the consumer goods and retail sectors are benefiting from rising disposable incomes and urbanization. Infrastructure development is also an important topic, with the government focusing on projects such as transport networks, stimulating construction and engineering development.

“The electric vehicle (EV) sector is also expected to grow rapidly on the back of rising environmental concerns and supportive policies, benefiting manufacturers and battery technology companies,” Mishra said, adding that he was bullish on stocks like Birlasoft, Dalmia Bharat, ITC, and Tytan.

“Birlasoft is investing in new technologies such as generative AI capabilities and training its employees, with a focus on long-term growth. Moreover, it operates in various verticals such as energy, manufacturing and BFSI. Dalmia Bharat, on the other hand, is focused on driving volume-led growth with better execution. The cement sector presents significant opportunities driven by infrastructure development, strong demand from the housing and real estate sectors and private capital investment,” he said.
WHERE TO INVEST 10 LAKH RUBS?

Mishra said that considering the current scenario, an investor can allocate Rs 7-8 lakh to the equity market, focusing primarily on large-cap stocks, supplemented with investments in mid-cap and small-cap stocks, while keeping the remaining funds available for purchasing opportunities during profit-generating periods.

“Allocate 70-80% to large-cap stocks to ensure stability, lower risk and consistent returns as these companies typically have strong market positions and good financial health. The remaining 20-30% can be invested in mid- and small-cap stocks that offer greater growth potential despite increased risk. This strategy balances stability with growth opportunities, optimizing the risk-reward ratio for the investor,” he said.
EXPECTATIONS FROM EARNINGS SEASON 1ST QUARTER

The market analyst said the upcoming earnings season could see mixed results due to uncertainty surrounding the elections. The lack of fresh government tenders could significantly impact sectors like infrastructure and capital goods. Also, banking and NBFCs could see a slowdown in spending growth. However, defensive sectors like utilities and FMCG are expected to remain resilient, while IT could post mixed numbers.
WHAT TO EXPECT FROM A BUDGET

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

“Markets are expecting reforms to attract foreign investment, steps to simplify the tax system and a greater focus on sustainable development and green energy. In addition, measures to support the small and medium-sized enterprise sector and initiatives to increase job creation are expected to be key points,” he said.