The Head of Fundamental Research at Anand Rathi Shares sees one difficult quarter ahead for consumption, but is pounding the table on defence, infrastructure, and select power plays for the next three to five years.
Narendra Solanki isn't chasing the metals rally. He respects it, but thinks most of the move is already in the price.
"Much of the part has been played," Solanki told ET Now, suggesting the sector is more likely to consolidate near current levels before any meaningful follow-through. For investors with a three-year horizon, staying invested still makes sense. For those hoping for a quick continuation of recent gains, patience may be tested first.
Defence: Still his highest conviction call
Three to four years into a structural bull run in defence, Solanki isn't close to trimming conviction. He sees another three to five years of outperformance ahead for the sector.
What's changed recently is the nature of the companies themselves. Solar Industries is his case in point. It's a business that started as an explosives manufacturer and has steadily transformed into a platform provider making sophisticated missile boosters. Astra Microwave's latest results were strong. BEL continues to deliver.
The theme threading through all of this: Indian defence companies are no longer just component suppliers. They're becoming final product providers, and the market is only beginning to price that transition in.
Power: Renewables over everything else
On the power sector, Solanki's preference is pointed. He's far more positive on renewables than conventional utilities; Waaree Energies is his top pick in the solar space, and he's watching Adani Energy's battery energy storage system (BESS) buildout with interest, calling the growth runway there "very long."
JSW Energy gets a constructive view, but it's a patient money play. Capex is moving at a healthy clip, execution will take time, and the stock is expensive on near-term numbers. The payoff comes when projects actually commission, not before.
Footwear getting a second look
One of the more interesting observations from this earnings season: the footwear space may be waking up. Solanki has a positive view on Metro Brands, and RedTape's 70% PAT growth with margin expansion, the stock was up 12% on the day, signals that a sector long ignored by the market is finding its footing. Two to three strong quarters could follow as retail consumption gradually recovers.
Consumption: One quarter of pain, then recovery
The consumption sector is the honest acknowledgment in Solanki's outlook. Volume growth is holding up, but cost pressures, particularly from raw material sourcing out of West Asia, are squeezing margins. With no quick resolution to regional tensions in sight, he expects at least one quarter of flat or underwhelming profitability.
His best-case scenario: Q3 of this financial year sees a meaningful uptick, once inflation moderates and companies get room to breathe.
Where Q4 earnings are pointing
Beyond metals and defence, Solanki flagged hospitals as a quiet standout this season, capacity operationalisation is underway and numbers are improving. Auto ancillaries remain a favoured space. And within power infrastructure, transmission and distribution, GE Vernova and TD Power both posted strong results, looks well-positioned for the next three to four quarters of sustained order flows.
On banks, his hierarchy is straightforward: ICICI and Axis among large private lenders, SBI among PSUs, and for those willing to go smaller, public sector names over private ones.
The current quarter, he warns, will absorb the real shock of the ongoing macro crisis. After that, the picture gets cleaner.
