Contrarian Picks in the market

With markets poised at reasonably high valuations it makes sense to consider some contrarian bets. For risk averse investors it will be a good idea to book out of sectors which have performed very well and log into sectors like Telecom and Oil and gas which have been laggards over the last couple of months

Telecom

This sector has witnessed a lot of consolidation in the recent months on the back of intensified competitive forces. In a very short period of time various stocks in the sector have seen a sharp fall. We believe although the margins of major player would impact severely yet the outlook is not as bad as some participants believe. There is plenty of volume growth which will unfold over the next few years. Moreover after some consolidation pricing power will come back to players once the industry matures and goes through this period of consolidation. Majority of bad news is already factored in and positive surprises are likely to appear over a period of time. We recommend long term aggressive investors to buy Bharti Airtel, Idea and GTL Infra in the telecom space.

Oil & Gas

Oil and gas is the other sector which has been underperforming for quite some time. Here too the fundamentals are not bad as majority of the large players have been consolidating their position in the industry. Also oil and gas are extremely critical commodities which have no competition from any alternate natural resource. As the global economic recovery gathers momentum, demand for fuels – oil and gas is likely to skyrocket. Global refining margins which have plummeted will start looking up again. Also the various oil and gas discoveries done by Indian Companies will result in upward revision of their respective valuations. We recommend buying Reliance Industries, Cairn India and Gail as long term contrarian picks.