Chakri Lokapriya sees value in cyclical and PSU stocks despite market volatility

Amid mixed market signals, investors are finding selective opportunities in cyclical sectors, railways, defence, and PSU banks, according to market strategist Chakri Lokapriya, CIO-Equities, LGT Wealth. While near-term triggers remain limited, he suggests that valuations and strong order books make certain sectors attractive for long-term bets.

“Generally, overall, given that post Trump’s new 15%, it is a net-net positive as in net incrementally status quo—that is, whether it is 15% or 18% does not move the needle much—but at least it kind of gives you clarity that their upper end is probably around 18%. India can live with those numbers, but companies are unlikely to spend, do any capex of any meaningful amounts until about there is clarity on the US Supreme Court ruling, which means another five months, six months goes by. So, meanwhile, incrementally, because it has been sold off quite… there is reasonable valuation comfort. So, we find sufficient pockets in cyclical bits where we can buy,” he said.

On capital goods and defence, he said, “Capital goods and defence—both of them are long-dated plays. Defence is even more long-dated. Their order books are phenomenally strong as we all know, which means that gives you the revenue clarity. Valuations are okay. They are not expensive. And you will get these incremental contracts like you had few days ago between India and France and those kinds of things will kind of support the sector. So, they are all good long-term buys, nothing immediate.”

However, he cautioned that capital expenditure may remain subdued in the near term. “Now the latest US Supreme Court ruling will kind of put some breaks because companies will still wait and watch, whether it is textile companies, other exporters—they would not do any kind of capex. They will wait and watch, that means another six months goes by. So, there you have to be slightly more selective. Maybe the EPC companies and domestic construction companies, maybe yes.”

The railways sector also shows long-term potential despite short-term pressure. “That sector has actually suffered from what [were] over expectations. It is actually growing very well. You take whether it is Titagarh, Jupiter, all these companies—order books are very strong, revenue execution is good, EPS profile, balance sheets are clean. And these companies will grow at a much faster pace in the next, let us say, two to three years. But immediate triggers are not there. So, again, given that the valuations have kind of fallen, it is worth buying into overtime,” Lokapriya noted.

Regarding stocks like Eternal, he pointed out concerns around profitability versus expansion. “A number of things. Some of the overblown things like continuously whether they can be margin improvement ever at all, whether it is Eternal or Swiggy, they are still number one, number two players. Margins will take quite some time. They are expanding into any number of lines of businesses, and that is the main thing because whether the profitability will keep up with the valuation is the concern.”

On the Indian Railway Finance Corporation (IRFC) offer-for-sale, he said, “No, you summed it up very well. The next few days clearly… after that definitely yes. Because again, railway is very important both strategically as well as economically for the country, and that is an area also luckily the government has its focus on. And as a financing vehicle, it remains because railways is a difficult area for banks to finance or NBFCs or any other lender to finance, so they do incremental bits of it. The main bit of financing will come from IRFC, so there is growth. So, answer is yes.”Finally, he spoke on PSU banks, energy, oil and gas, and FMCG and pharma. “So, in the case of banks, the momentum clearly remains with the PSU banks. The credit growth is stronger. All the government capex will go to the PSU banks. The balance sheets are clean. All the noise around whether there will be divestments or FDI coming in is now gone. It is clear that it is status quo. So, yes, from that perspective, valuations are good. Even SBI trades only at about 1.3 times. So, PSUs will continue to grow, and as and when the consumer stabilises and private capex stabilises, that is when we will see an improvement in private banks.”

Lokapriya’s insights highlight a market where long-term structural growth remains intact, even as short-term triggers and geopolitical uncertainty temper immediate investor enthusiasm.