Dharmesh Kant, Head of Research at Chola Securities, has outlined a focused investment strategy for the coming months, emphasizing cement, metals and banking sectors while recommending caution in export-linked and automotive stocks. His approach reflects a measured response to current market conditions and potential policy changes affecting various industries.

Cement Sector Outlook

Kant expressed optimism about the cement industry, noting that recent results have broadly met expectations with steady volume growth and gradual pricing improvements. He projects industry volumes to grow in high-single digits in quarter four, supported by blended price increases of 2-3% in the near term.

UltraTech Cement remains his top pick in the sector, with Kant believing returns of 15-20% are possible over a three-to-six-month horizon, despite potential limitations in near-term price gains. He emphasized that investors staying invested for the entire year could see attractive returns from cement companies.

Metals and Banking Focus

In the metals sector, Kant maintains a constructive view on JSW Steel, highlighting the company's strong execution, rising market share and operating efficiencies. He believes recent price increases and safeguard duties could provide earnings support going forward. The research head indicated that metals and banking represent sectors where his firm remains "fairly bullish" for a six to nine month trading investment perspective.

Cautious Stance on Auto and Export Sectors

Kant struck a more cautious tone regarding automotive stocks, particularly in light of a potential India-EU trade agreement that could lower tariffs on European car imports. He identified several major Indian players that could face increased competitive pressure:

• Mahindra & Mahindra: Expected to face tough competition
• Maruti: Potential challenges as it expands into premium segments
• Hyundai: Also likely to encounter serious competition

However, Kant noted that crucial details of the trade agreement remain unclear, particularly whether the provisions apply to electric vehicles or internal combustion engine vehicles. He emphasized that detailed analysis would only be possible once the "fine print" becomes available.

For export-oriented sectors such as textiles, Kant maintained his cautious outlook. Trade uncertainties with the US and Europe are expected to keep margins under pressure, despite some relief from currency depreciation. He suggested that "outsized opportunity looks unlikely in the near term," with investors potentially needing to wait six to nine months for meaningful improvement.

Investment Strategy

Given the recent run-up in auto stock prices and uncertainty surrounding trade agreements, Kant advised a cautious strategy for these sectors. His overall approach focuses on sectors with clearer near-term prospects while avoiding areas where policy uncertainties could impact performance. The research head's recommendations center on a 6-9 month investment horizon, balancing trading opportunities with fundamental sector strengths.