Oil & Gas, Metals, IT, Capital Goods and Infrastructure are likely to perform well in 2013, according to IndiaNivesh Securities. The stock broker has provided following investment rationale for these sectors:
Oil & Gas: We believe oil & gas sector is likely to do well in 2013 on the back of increase in gas prices, increase in output & stabilizing/ upward movement in refining margins. Govt is due to come out with revised pricing for gas from Reliance KG D6 which is due for revision in 2014 (April 2014). We think negotiations for this will start much earlier & there would be lot of noise on what could be the price. While we cannot predict what will be the final price, we can say with fair bit of confidence that whatever will be the revised price, it will be significantly higher than current $4.2/mbtu. As per the govt’s stated policy, whatever is the price given to Reliance same will be given to other producers. That means ONGC & OIL will also get the same price. This in turn means substantial increase in both these companies’ earnings. We are bullish on GAIL as we think short supply of gas leading to lower transmission volumes is temporary & will be overcome in next couple of years by imports of LNG. Increased capacity at Dahej will also help. Enhanced capacity of petrochemicals at Patta will add to profitability, stock is available at cheap valuation. Cairn is likely to beneficiary of enhanced production at existing fields from 170Kbpd to 240Kbpd & going away of overhang of share supply from selling by Cairn PLC UK.
Metals: In our opinion early signs of revival in Chinese economy are visible. We believe any economic revival package initiated by China will augur well for metal stocks. Although global demand will not revive very strongly but in our view it will not deteriorate further hence global commodity prices are likely to remain firm. Indian producers are likely to be beneficiary due to low cost of production as well as increased capacities. Changed dynamics of mining in India owing to environment concerns will continue to distort demand- supply equation. We like Sterlite Inds in this space. The co has shown strong performance in Copper, Aluminum, Zinc, Lead & Silver through standalone & its subsidiaries. Restructuring of group is likely to be completed on H1CY13 which will result in more lean structure & give better insight to investors. Any pricing pressure in metals can be easily made up by increased production by the co driven by enhanced capacities. We also like Hindalco amongst metal pack as its domestic business is doing very well, closure of many smelters in China due to prolonged subdued prices of metal & better performance of Novelis make for compelling reasons to buy Hindalco.
Information Technology: This sector has been beaten down in 2012 due to Euro zone crisis & unfavorable election rhetoric in US. We believe 2013 onwards lot of political pressure from US (at least noise) will go away & Euro region will muddle its way, leading to some pick up in outsourcing activity. Stocks in the sector are building in very low growth hence any small improvement in demand scenario may lead to significant move in the stocks.
Capital goods/ Infra: Although the recently announced CCI (Cabinet Committee on Investments) is a much watered down version of NIB, we believe it will provide impetus to many stalled projects in order to revive GDP growth. We think roads will be first sub segment that may get quicker approvals (especially EPC contracts). We like ILFS Transport & MBL Infra in this space. PGCIL, ABB, Siemens, Alstom Projects & Alstom T&D are other stocks that we like in power related cap goods. BHEL is our contrarian buy since Rs 210 levels. Engine manufacturers like greaves Cotton, Kirloskar Oil Engines & Swaraj engines are other preferred picks.
Disclaimer: IRIS has taken due care and caution in compilation of data for its web site. Information has been obtained by IRIS from sources which it considers reliable. However, IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website.