Markets poised to reach new highs; Large caps, cars and jewelry create momentum: Amnish Aggarwal

Equities look set to soar to record highs as early indicators point to robust demand in the third quarter and improving macro conditions, Amnish Aggarwal, head of research at Prabhudas Lilladher, said in an exclusive conversation with ET Now.Aggarwal believes that the market’s prolonged consolidation phase is coming to an end and that the overall demand environment is strong enough to push the indices higher this year.

Rare earth moves positively, but no immediate automatic revaluation

Commenting on the government’s adoption of the rare earth policy, Aggarwal said the impact will be structural and long-term, and not an immediate market trigger.

“This is not a quick catalyst for auto stocks. PV EV penetration is still low. The policies will ease supply chains over time, but investors won’t buy cars just because of this announcement,” he noted.

However, he expects two-wheeler manufacturers – with higher EV couplings – to see relatively faster benefits.

Large caps lead the way before small caps catch up

Aggarwal said market breadth has increased in recent months, especially among largecaps. “Largecaps offer a return potential of 15 to 20% as of now. Once they experience meaningful upside, investors will shift to small and midcaps,” he added. Small caps, he said, had previously gotten ahead of fundamentals, making large caps the preferred position for now.

Discretionary consumption: cars and jewelry shine

Aggarwal highlighted that discretionary consumption remains uneven despite the increases during the festive season.

• Cars: Strong numbers and continued demand prospects
• Sustainable materials: Selective improvement
• QSRs: Mixed to weaker trends
• Staples: Inventory correction carried out; traction likely in the offing
• Jewelry: “Despite the high gold prices, jewelry companies are recording a turnover growth of 15 to 20%”

Automobiles and jewelry remain the standout categories in discretionary consumption.

Paytm: Recover strongly, but future gains will be gradual

Paytm’s approval for multiple licenses has improved sentiment, but Aggarwal expects the pace of revaluation to slow down.

“Most of the negative overhang is gone. But the incremental uptrend will now be measured and slower,” he said.

Infrastructure and global cyclical sectors: sectors to avoid for the time being

Aggarwal remains cautious on infrastructure and capital goods due to expected moderation in government investments.

He is also underweight global cyclical sectors such as metals and energy, given weak visibility and external risks.