Wright Research advises investors to increase exposure to financials and auto ancillaries due to improving earnings visibility, while downgrading cement and oil marketing sectors, amidst a complex global backdrop and evolving market dynamics.
Wright Research has shifted its sector preferences after the June-quarter earnings season, saying investors should lean more heavily into financials and auto ancillaries while cutting back on cement and oil marketing companies. The firm’s view is that the latest results have strengthened the case for areas with clearer earnings visibility, even as geopolitical tensions and higher input costs continue to cloud the outlook for the wider market.
Industrials remain a central theme in the strategy. Wright Research said companies tied to defence, power transmission and grid infrastructure are beginning to convert large order books into revenue, which has improved confidence in their near-term prospects. Telecoms are also favoured, with the firm pointing to stronger average revenue per user, or ARPU, alongside the rollout of 5G and better domestic pricing power. Pharmaceuticals, meanwhile, are benefiting from steady local demand and export earnings supported by currency movements, even though some individual companies have faced pressure from weaker US sales and higher freight costs, according to Business Standard.
The call to increase exposure to financials and auto ancillaries reflects a more selective reading of the quarter. Wright Research said auto-parts suppliers have held up better than original equipment manufacturers, helped by stronger pricing power, export business and orders linked to defence. That contrasts with the tougher environment for vehicle makers, which have faced input-cost pressure and fierce competition. On the financial side, the firm sees the sector as well placed to benefit from improving credit demand and relatively cleaner earnings trends.
By contrast, cement and oil marketing companies have been downgraded. Wright Research said both sectors showed weaker performance scores after the results season, with crude volatility fuelled by unrest in West Asia adding to cost pressure. Recent company reports underline that strain: Reliance Industries posted a rise in revenue but a fall in net profit, while other firms across energy and chemicals have also faced margin pressure from disruptions in global oil markets. Even so, the broader Indian market has proved resilient, with large listed companies delivering modest profit growth and mid- and small-cap stocks outperforming thanks to their domestic focus, according to the research note.
Looking ahead, Wright Research expects a broader recovery in large-cap stocks to emerge only later in FY27 or into FY28, provided crude prices stabilise and US interest rates ease enough to encourage foreign inflows. Until then, the firm is steering investors towards sectors with visible earnings momentum rather than betting on a uniform rebound across the market.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
