By Diwakar Rana
While Indian markets seem overvalued, a few sectors still present attractive valuation metrics, offering promising investment opportunities during this festive season. These industries stand out as value plays amid broader market enthusiasm, making them appealing to discerning investors.
Banking and Finance
The banking industry offers attractive value opportunities, especially among mid-sized private banks. These institutions have seen loan growth of 15 per cent to 20 per cent, with some exceeding 20 per cent. Asset quality has improved, with non-performing assets declining. Deposits are also rising, adding financial stability. Despite strong fundamentals, many banks and NBFCs trade at low valuation multiples, with P/B and P/E ratios in single digits, creating value opportunities. However, the microfinance sector faces risks, with early signs of a slowdown due to election and the impact of heat waves on agriculture.
Infrastructure Sector
Infrastructure companies, especially in roads, highways, tunnels, real estate, and water, are poised for strong performance, with expected revenue and profit growth of 15 per cent to 20 per cent. Many have robust order books extending 3-4 years, providing clear revenue visibility. Strengthened by selling non-core HAM assets and reducing debt, these companies are now in stronger financial positions to reinvest and pursue new projects. Growth opportunities are emerging in water infrastructure, particularly in wastewater treatment and desalination, where order books are expanding.
Oil and gas sector
The oil and gas sector continues to exhibit volatility, primarily due to fluctuations in crude oil prices. However, within this sector, companies involved in upstream exploration and drilling present a potential investment opportunity. Despite the price volatility, these companies benefit from certain favourable conditions, such as stable margins and a manageable cost environment, particularly with drilling and oil rig rates remaining at comfortable levels.
A significant driver of future growth in this sector is the large-scale capex that is set to flow in, as PSUs and the government announce new projects and orders. The government's proactive stance on energy security and infrastructure development ensures that a substantial number of resources will be allocated to the oil and gas sector, particularly for exploration and production activities.
The combination of strong government support, stable operating margins, and rising demand for oil creates a more favourable outlook for upstream oil companies, even amid broader sectoral volatility.
Realty
The real estate sector is experiencing a robust boom, fueled by rising incomes, increasing households, and ongoing urban migration. This growth is particularly strong in the residential market, which has outpaced the commercial sector. Cities such as NCR and MMR have seen a surge in demand for luxury residential projects, with some high-end developments selling out within a day of their launch. This reflects the rising afluence of urban buyers and their desire for premium living spaces.
In addition to strong sales momentum, many real estate companies are well-positioned for sustained growth due to their large land reserves. These land banks provide the flexibility to launch large-scale projects, offering significant long-term growth potential over the next few years.
The author is the Fund Manager, PMS at Prudent Equity.
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