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Nifty rides high on Modi wave: What should investors buy?

The Nifty rose to a record high on Monday as blue-chips such as ICICI Bank gained after Prime Minister Narendra Modi on Friday vowed to fire up the bureaucracy to deliver results, while easing wholesale inflation also helped.

The broader 50-share index rose to 7,844.30, surpassing its previous all-time high of 7,840.95 hit on July 25.

It is more of a hope rally, based on PM Narendra Modi’s speech at the Red Fort, says Jagdish Malkani, Member BSE & NSE. “The bull market is alive and well,” he told CNBC-TV18. However, he does admit that besides “hope” there is not much to go about right now.  

Delivering his first Independence Day speech, Modi emphasised the need for better governance but announced none of the sweeping market reforms that many who handed him India’s biggest election mandate in three decades have been awaiting.

India’s wholesale price inflation easing to a five-month low in July, just days after retail inflation accelerated to a two month-high of 7.96 percent, helped.

Interestingly, last week the market was contemplating a deeper correction. With the advantage of hindsight, one can say that corrections are good opportunities to buy in a bull market.

ICICI Bank  rose 2.1 percent while  Tata Motors advanced 2.8 percent.

According to Ajay Srivastava, CEO of Dimensions Consulting, the “right” sectors have gone up. “OMCs have gone up correctly speaking given the fact that they are very, very close to now being a market-driven company and they have a book value of almost less than 3 compared to their global peers of 5.5 and above,” he said.

The rally has given a good point for people to exit out the stock they shouldn’t be in the first place and to create fresh position, he said. He believes oil, auto and pharma are the sectors to be in currently. On the flip side, he advocates dumping stocks like  BHEL and L&T .

He expects a portfolio return of 25 percent by March 2015, even if someone starts buying today.

Market expert Anand Tandon believes the Modi factor is out now, so sectors (like infra, capital goods) running for reform push might slow down. Instead, he said sectors (like consumers, exports), which put up a good earnings performance, will start to do well.   

Deven Choksey, MD, KR Choksey Shares & Securities expects commodity companies (like cement, metal) to do well going forward on the back of healthy demand. He also expects the consumption story to continue, so auto majors like  Bajaj Auto and Tata Motors are likely to remain attractive. He is also bullish on PSU like ONGC on reform clarity.

Choksey advises investors to stay away from stocks with balance sheet issues.

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