As earnings diverge, the market becomes alternative; Power, EV and midcaps emerge as key bets: Siddharth Khemka

India’s equity market is entering a phase where stock selection will be more important than exposure to the broader market, according to Siddharth Khemka, head of retail research at MOSL, with muted largecap earnings and persistent macroeconomic headwinds clouding the outlook.

While benchmark earnings growth remains under pressure, Khemka highlighted the resilience of mid- and small-cap companies. “We were probably surprised by the earnings surprise in mid and smallcap. So, if you look at our midcap coverage universe, our expectation was around 17-18% earnings growth as against 14-15%,” he said.

The comments come at a time when rising crude oil prices, a weak rupee and the possibility of less rains weigh on investor sentiment. “The IMD has predicted below normal rainfall this season which is again a macro headwind for the market in the next few quarters,” noted Khemka.

Against this backdrop, he believes investors should focus on domestic themes with strong earnings visibility. “Clearly, it’s a bottom-up market, not a broad-based market where you have to selectively look at stocks, ideas and themes where the delivery of earnings growth is consistent.”

Khemka remains innovative on cables and wires, cooling products, manufacturing and power in select sectors. “We like stocks like Polycab, KEI, RR Kabel,” he said, adding, “Due to extended summer, we are seeing strong interest in stocks like Voltas, Blue Star.”

Power is one of the main structural themes of MOSL. “Certainly, power as a space is something that we believe is structurally poised in India,” Khemka said, citing growing electricity demand and renewable energy investments. He identified JSW Energy, Tata Power and NTPC as stocks that could benefit from the trend.

On dividend-yield plays, Khemka favors Coal India over ITC. “Compared to that you have Coal India where volume growth is strong, realizations are improving and you get the same dividend yield of 5% plus,” he said.

In the automobile sector, he expects electric vehicles to remain the preferred route for investors. “EVs are a way that clearly looks like a better option than flex fuels,” Khemka said. His preferred names in two-wheelers include Aether Energy and TVS Motors, while “Tata Motors Passenger Vehicles looks interesting now that the CV business has been sold and I think it is the market leader in the EV passenger vehicle segment.”

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