India's stock markets are experiencing a clear shift in momentum, with sectors that stayed quiet for years now coming back into focus. According to The Economic Times, Devang Mehta, Deputy Managing Director and CIO - Equity NDPMS at Spark Capital Private Wealth, reports that sector rotation has started gaining pace. The recent uptick in tobacco, alcobev, and broader consumption stocks is not just noise, as markets are beginning to reward businesses that combine a good story with real earnings, strong cash flows, and positive management commentary. Many consumption companies — both discretionary and non-discretionary — have reported margin expansion or volume growth, triggering a rerating that has been long overdue.
For investors building a fresh portfolio today, Mehta recommends a mix of three clear themes that should deliver strong results over the next two to three years. The first theme focuses on financialization of savings, covering private sector banks, NBFCs, wealth managers, stock brokers, asset management companies, exchanges, and other financial market intermediaries. As more households shift from physical assets like gold and real estate toward equities and mutual funds, this segment is expected to see sustained growth. The second theme revolves around capital expenditure and infrastructure, with capital goods companies, engineering firms, air compression manufacturers, HVDC players, and power ancillary companies positioned to benefit from continued government and private sector spending on building capacity. The third theme blends both discretionary and non-discretionary consumption, with particular emphasis on the automobile sector, where passenger vehicles and two-wheelers have seen strong momentum over the past six months driven by GST-related tailwinds and India's still-low per capita vehicle ownership.
On the banking debate between private and public sector banks, Mehta has a clear view that private sector banks are better placed to outperform over the next two years. According to The Economic Times, large private sector banks such as HDFC Bank, ICICI Bank, and Axis Bank have underperformed partly because of sustained selling by foreign institutional investors, who hold large positions in these names. However, the operational commentary from these banks has been improving, with metrics like deposit growth, credit growth, and loan advances all worth watching closely. Private sector banks currently trade at a valuation premium to PSU banks, but Mehta argues that premium is justified given the improving fundamentals and the likelihood of FII selling pressure easing.
For investors who missed the first 2,000 points on the Nifty, Mehta's advice is straightforward — stop worrying and start building a portfolio around the three clear themes. As reported by The Economic Times, timing the market has become increasingly difficult, with sharp gap-ups and gap-downs becoming routine over the past few months. The recent uptick in tobacco, alcobev, and broader consumption stocks is not just noise, as markets are beginning to reward businesses that combine a good story with real earnings, strong cash flows, and positive management commentary. After a two, three, four-year hibernation for many such businesses, they are coming back to the fore, with the baton now passing to consumption-oriented sectors that were once considered defensive plays.
