Rahul Arora, CEO of Ashika Institutional Equities, warns investors to exercise caution if the Nifty approaches the 25,000 mark, viewing it as a potential profit-booking opportunity. Speaking to CNBC-TV18, Arora stated that while markets have rallied on hopes of a US-Iran peace agreement, several uncertainties still remain that warrant a more cautious approach. He emphasized that it is too early to call this the beginning of a new bull run, with corporate earnings for the June quarter offering a clearer picture of how businesses are coping with higher oil prices, freight costs and demand conditions in key markets such as the US.
According to Arora, interest rates remain a significant uncertainty, with no consensus on whether the Reserve Bank of India will keep rates unchanged until October or raise them as early as August. He identified monsoon performance as another key risk factor, noting that after signs of rural recovery in recent months, a weak start to the rainy season could hurt farm incomes and consumer spending in rural India. Some retailers with strong presence in states such as Uttar Pradesh and Bihar are already expressing concerns about Britannia Industries, highlighting the vulnerability of consumer-facing companies to weather-related disruptions.
Arora believes investors should be selective in the consumer sector, arguing that while many market participants expect consumer staples to outperform discretionary companies, valuations remain expensive with most large staples companies trading at 45-50 times earnings despite relatively modest volume growth. His top picks in the staples space include Tata Consumer Products, Nestle India and Eternal, where he sees better prospects for profit growth and margin expansion. He remains optimistic about the pharma and healthcare trend, stating that healthcare stocks could significantly outperform benchmark indices over the medium term.
In the new-age technology space, Arora favours Swiggy (Zomato) over One 97 Communications, believing the company benefits from strong food delivery growth and comparatively lower losses in its quick-commerce business. He estimates 'I think you could probably make 25-30% on Eternal' and emphasizes that the next big trigger for internet companies will be profitability rather than growth alone. If companies can reduce losses and improve cash flows, they could see a re-rating similar to what One 97 Communications (Paytm) experienced when it shifted focus towards profitability.
Arora remains selective on small-cap and micro-cap opportunities, noting that while a breakout above 24,000 could pave the way for higher levels, investors may find greater opportunities in smaller segments rather than large-cap benchmark indices. He believes there is a parallel bull market taking place while large-caps go through a correction period, with several small-cap stocks having delivered gains of 50 per cent or more over the last three months. Shah's earlier analysis supports this view, emphasizing that the writing on the wall indicates a parallel bull market taking place while the Nifty and largecaps are going through a time correction.
