Expect a market turnaround by
H2FY26: Caprize Investment - smallcase
Manager
·
High-growth
stocks looking attractively valued, set for an earnings re-rating cycle
·
High-growth
sectors will be the key investment themes of 2025
·
Discretionary,
power, renewables, water treatment, manufacturing demonstrate strong earnings
visibility and long-term growth potential
Bangalore, 6th
March 25: Caprize
Investment – a smallcase manager has released a press note on the key
investment themes of 2025. The smallcase manager expects a turnaround in the
market by H2FY26. The wealth manager is of the view that the high growth will
be the key investment themes of 2025, with those stocks looking attractively
valued, set for an earnings re-rating cycle.
Key Investment Themes and stock picks for 2025
include:
- Discretionary
Consumption (Value Retail, Jewelry manufacturers, Mid/premium Hotels) : v2 Retail, Style Bazaar,
Sky Gold, Samhi, and Kamat
- Power
(Transformers, transmission EPC) - TARIL, Shilchar, and Rajesh Power
- Manufacturing/
Make in India:
Garware Hitech and Vishnu
- Renewables: INA, KPEL, and Shakti Pumps
- Water
Treatment:
Ceinsystech
The focus remains on Discretionary consumption,
which comprises value retail, jewelry manufacturers, and mid-to-premium hotel
chains. The power sector also takes center stage with a strong focus on
transformers and transmission EPC projects. Also, niche manufacturing and
Make-in-India will continue to gain advantage through government policies and
domestic consumption. Renewables, driven by a robust backward integration
theme, will offer selective investment opportunities. Data centers, too, will
see sustainable growth levers due to enhanced digital infrastructure
requirements. In addition, water treatment is gaining importance as the need
for sustainable solutions and water infrastructure rises.
Market Correction and Volatility Outlook
The current market correction/consolidation is
likely to sustain as capital outflows continue over the next two quarters in
absence of any new reforms. An earnings de-rating cycle will gain momentum,
with Q2 and Q3 FY25 performance expected to reflect this trend. However,
high-growth sectors with strong earnings visibility are likely to stabilize. As
market estimates shift to FY27 post Q1FY26 numbers, we expect a turnaround post
2H FY26, with high-growth stocks looking attractively valued, setting the stage
for the next earnings re-rating cycle.
Liquidity and Valuation Trends
Recovery in the market is dependent upon a major
liquidity event. In past years, liquidity has indeed been plentiful; however,
during the next two quarters, issues on this front will arise. Still, various
high-growth stocks (25%+ year-on-year growth) are presently priced at 15-20x
one-year forward multiples. When the market is consolidating, these multiple
levels will begin looking more palatable on a FY27 base.
Sectoral Performance: Bullish and Bearish Outlooks
Sector-wise, some sectors are likely to lag behind
because of numerous macroeconomic and sector-related issues. These are oil
& gas, BFSI, auto, defense, railways, chemicals, consumer
non-discretionary, and IT. On the other hand, discretionary consumption, power,
manufacturing, renewables, data centers, and water treatment are likely to
continue with growth and provide large-scale investment opportunities.
Piyush Mehta, smallcase Manager and CIO at Caprize
Investment says, “The
changing market environment in 2025 holds challenges and opportunities alike.
Short-term volatility can continue in the face of liquidity pressures and
earnings normalization, but sectors like discretionary consumption, renewables,
and niche manufacturing offer strong long-term potential. Strategic investors,
prioritizing earnings clarity and valuation discipline, will be well equipped
to ride out this fluid environment”.
Strategic sectoral investments and long-term
earnings growth remain as important as ever as we work through the risks of
2025. Macro-economic trends, liquidity levels, and shifts in valuation need to
be watched very closely by investors to maximize portfolios in the new market
environment.
About smallcase: smallcase is a leading provider of investment
products & platforms for the Indian capital markets industry. Launched in
2016, its offerings across listed stocks, ETFs & REITs have served over 10
million individual investors till date. smallcase’s technology & platforms
are used by an ecosystem of 250+ top financial institutions to offer portfolio
exposures to their clientele. In 2023, smallcase entered the asset management
space to develop index funds & ETFs as India’s only passive-only fund
house.
Download the smallcase app here: https://smallcase.onelink.me/62WC/pr
