Defence, consumption and BFSI offer strong multi-year visibility: Pankaj Pandey
Pankaj Pandey of ICICIdirect.com identifies defence manufacturing, consumption plays and financials as sectors offering strong multi-year growth visibility. Defence sector benefits from ₹12.00 lakh crore approved procurement proposals with faster order conversion expected. Key beneficiaries include Bharat Electronics, Bharat Dynamics, Solar Industries and Hindustan Aeronautics. In consumption, Titan Company and Phoenix Mills offer attractive growth prospects, while Bajaj Finance and Shriram Finance remain preferred BFSI picks.
*this image is generated using AI for illustrative purposes only.
India's defence manufacturing, select consumption plays and financials continue to offer strong long-term growth visibility, even as sector rotation shapes near-term market performance, according to Pankaj Pandey, Head of Research at ICICIdirect.com. Speaking to ET Now, Pandey outlined his investment strategy focusing on sectors with earnings visibility rather than chasing recent outperformers.
Defence Orders Set for Acceleration
The defence sector presents compelling opportunities with faster conversion of approvals into executable orders emerging as a key positive. Over the past four years, the Defence Acquisition Council has approved procurement proposals worth nearly ₹12.00 lakh crore. While historically order conversion took two to three years, Pandey expects a much faster turnaround this time.
"Our sense is that many of these approvals could translate into orders within the next six months," he said. The sector benefits from sustained defence capex at nearly 2.50% of GDP.
| Company | Sector Focus | Growth Outlook |
|---|---|---|
| Bharat Electronics | Defence Electronics | Mid to high-teen earnings growth |
| Bharat Dynamics | Defence Systems | 4-5 year visibility |
| Solar Industries | Defence Explosives | Strong order pipeline |
| Hindustan Aeronautics | Aerospace | Sustained capex support |
Consumption Plays Gain Strategic Edge
Pandey termed Titan Company's entry into lab-grown diamonds a "much-needed step" as affordability becomes critical amid high gold prices. "Titan remains one of the few largecap consumption plays where we can expect mid- to high-teen growth over the next three to four years," he said, adding that the company's watches business outlook has also improved.
He also highlighted Phoenix Mills as a strong proxy for consumption growth, supported by:
- Rising footfalls across retail locations
- Diversified retail exposure
- Improving consumption trends
BFSI Sector Maintains Strong Fundamentals
Within financials, Pandey remains positive on select names with strong growth visibility. For Shriram Finance, he cited a recent rating upgrade that could lower funding costs and improve margins. On Bajaj Finance, he expects robust performance despite near-term concerns.
| Financial Institution | Expected Growth | Key Drivers |
|---|---|---|
| Bajaj Finance | 18.00-20.00% annual growth | 22.00-24.00% bottom-line expansion |
| Shriram Finance | Margin improvement | Rating upgrade, lower funding costs |
Sector-Specific Investment Strategy
Pandey advised caution on precious metals after their sharp rally, noting that ICICIdirect has been trimming exposure to silver ETFs. "Non-ferrous metals like copper and aluminium are at multi-year highs. It's not the time to chase them," he said, preferring ferrous names such as Tata Steel, aided by improving domestic prices and potential safeguard duties.
In pharmaceuticals, he sees stronger growth visibility in domestic formulations, naming Sun Pharma, Ajanta Pharma and Ipca Laboratories as preferred picks, citing regulatory stability and expanding domestic opportunities under Schedule M norms.
Contrarian Opportunities in IT and Real Estate
Pandey identified IT stocks as potential contra trades after underperforming, especially large players like Tata Consultancy Services and ER&D-focused firms such as KPIT Technologies. He also sees scope for sector rotation into real estate and capex-related themes as markets head into the new year, supported by the upcoming Union Budget and improving investment sentiment.
"Defence, BFSI, selective consumption, IT as a contra play and capex-linked sectors offer a balanced risk-reward as we enter the next phase of the market cycle," Pandey concluded, emphasizing the importance of focusing on sectors with earnings visibility in the current market environment.
16
