Banking, capital goods and midcaps seen driving market's next rally: Ashish Chaturmohta

Strong earnings in the broader market, improving momentum in financials and manufacturing, and favourable sectoral themes could help Indian equities scale fresh highs over the coming months, according to Ashish Chaturmohta from JM Financial.

Indian equity markets may appear to be moving sideways, but the underlying strength across key sectors suggests the broader trend remains positive, says Ashish Chaturmohta. He believes banking, capital goods and manufacturing stocks are well positioned to drive the next phase of the market rally, while midcap and smallcap companies continue to benefit from stronger earnings growth.

Banking Could Power the Next Leg of the Rally

According to Chaturmohta, the benchmark indices have been range-bound largely because of weakness in a few heavyweight stocks. However, he believes the strength emerging in financials could eventually push the market to new highs.

"Banking and financials have almost a 30% weight in the index, and that space is looking extremely positive... There is a very strong possibility that the 24,000 resistance will eventually be crossed, and we are going to move towards the 25,000 trajectory."

He added that private banks such as ICICI Bank and Axis Bank are showing renewed momentum, supported by attractive valuations and healthy retail credit growth.

Midcaps and Smallcaps Continue to Outshine
Chaturmohta said stronger earnings growth is helping midcap and smallcap stocks outperform their large-cap peers.

"Markets are rewarding the mid and smallcap space because of a very strong earnings trajectory... We believe small and midcap indices are going to outperform largecaps."

He also highlighted themes such as electronic manufacturing services (EMS), defence, aerospace, capital expenditure and contract drug manufacturing (CDMO) as key opportunities within the broader market.

CG Power Remains a Preferred Capex Play
The transmission and distribution segment continues to be one of Chaturmohta's preferred investment themes, with significant infrastructure spending expected over the coming years.

"CG Power is poised for a rally towards the 1,100-1,150 range over the medium term... The risk-reward looks attractive from both fundamental and technical perspectives."

Angel One Offers Growth Potential
Within the capital markets space, Chaturmohta believes Angel One stands out because of its strong market position and expanding business opportunities.

"Angel One has the potential to move towards 450-500 over the medium to longer term, supported by its strong operating performance and the new AMC business."

Siemens Energy Positioned to Benefit
He also remains positive on Siemens Energy, expecting it to benefit from strong industry demand.

"The stock has formed a very strong base around 3,700 and has the potential to move towards 4,300 over the medium term."

Amber Enterprises Preferred in White Goods
Among white goods and EMS companies, Amber Enterprises remains his preferred pick. "Amber Enterprises would be our top pick... As long as the stock remains above 7,800, a move towards 8,600 cannot be ruled out."

Eicher Motors Leads the Auto Pack
Within automobiles, Chaturmohta believes Eicher Motors offers the strongest combination of business momentum and technical strength.

"Eicher Motors has the most encouraging setup... The stock could target around 8,300-8,400 over the next four to six months."

IT Recovery Still Some Time Away
Despite attractive valuations, Chaturmohta remains cautious on the IT sector. "Even if IT recovers, it will not be a V-shaped recovery; it is more likely to be a U-shaped recovery... We expect the sector to remain in a long consolidation phase."

Defence and CDMO Continue to Stand Out
Looking at longer-term opportunities, Chaturmohta favours defence and pharmaceuticals, particularly companies with strong execution capabilities.

"Navin Fluorine has the potential to deliver nearly 30% upside over the next year... In defence, we continue to like Data Patterns because of its strong order book."

Reliance Building a Strong Base
On Reliance Industries, Chaturmohta believes the downside appears limited after an extended period of underperformance.

"We believe the 1,250-1,300 zone will act as strong support... Upside towards 1,450-1,500 cannot be ruled out."