India will continue to be a favoured investment destination

So this is new territory and there is certainly over-valuation in many pockets. While there will always be sub-segment and sectors for stock picking that will give good returns, at the mid and small-cap index level the performance may lag large-caps from this point onwards, say experts.

Some experts feel that the retail frenzy in the primary and secondary markets continues to be high. The euphoria is reflected in all parts of the market including cash equities trading, derivatives trading, and the IPO market.

It is too early to say that India Inc. is out of the woods. There seems to be a K-shaped recovery. The beneficiaries are the outward-facing (significant export component) companies and sectors and the larger companies. The domestic-facing sectors and companies are still to see a full recovery. Examples of the winning segments are information technology (IT), Pharma, Commodities and Metals, Specialty Chemicals, Textiles, Gems & Jewellery, large Banks, etc. Sectors like construction that benefit from Government spending have also done well. Domestic sectors like Auto, Consumers, small banks, and NBFCs still face challenges in demand and margins. The expectation is that domestic demand will be back on track in the second half of the financial year, beginning with the current festive season. So the next few weeks will be crucial to observe trends in demand for domestic sectors.

PSU banks had been under stress in the corporate book even before Covid, so they had been going slow on lending for a few years. The first wave hit them quite badly while in the second wave, the slippages are more or less in line with the industry.

In commodity market specific commodities like lithium or cobalt may see a super-cycle because we are talking about electrification of the whole vehicle force in the world, which will need these rare metals for batteries. For large commodities like steel or aluminum, production can be ramped up over a period of time because there is no structural shortage of ore. So we are looking at it commodity-by-commodity rather than paint all commodities with the same brush.