The Indian markets seem to be entering a very interesting phase. On the one hand, the interest in public sector stocks is rising due to investors’ focus on critical infrastructure sectors like railways and defence. On the other hand, the top-run public sector banks- SBI and Bank of Baroda have come out with very impressive Q2 results. Slowly investors are waking up to the attractiveness of public sector enterprises. This attractiveness is more due to the relative undervaluation of these companies when compared to their private sector peers.

Given the undervaluation, investors are flocking to own these companies whenever news flows turn out to be positive and promising. The more interesting observation is the sustained interest of FIIs in these companies. This will make for interesting comparisons when the shareholding patterns of these companies come out in Q3.

Market leadership is turning gradually and we are witnessing a churn right at the top. Companies which led the market from the lows of COVID are slowly losing their position. Companies which remained the laggards through the two waves of COVID are rising to take the leadership position in the market. Sectors which enjoyed excessive market attraction are slowly losing investor interest. Sectors that were avoided by the market are gradually regaining favour among investors.

It has been a phase of churn in ideas, themes, opinions and stocks. This phase of churn will continue till the end of the year. Investors who have been early to the party will significantly benefit from the shift in the market’s focus.

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