Although the Sensex has fallen around 12% since its high in September-October 2024, the decline in midcap and small-cap companies is alarming. Many companies in this category have dropped by more than 60%. This downturn contrasts with the rapid doubling of some midcap company shares in the period leading up to October 2024. While shares of many large companies have fallen by approximately 30%, it is encouraging to see that in some sectors, the decline has been minimal. Most large IT companies, private banks, and FMCG firms have either experienced minor losses or remained stable.

However, many companies in sectors such as industrials and capital goods are bleeding without any sign of recovery. A few notable names include ABB, Siemens, and Kirloskar Oil, which have sharply declined from their highs, with some losing more than 50% of their market value. This sector is unlikely to witness an uptrend, given the rising prices of metals, which are their primary raw materials. The increase in the prices of metals such as copper, aluminum, and zinc has already impacted the capital goods sector and is likely to continue doing so in the coming months. Therefore, it is advisable to avoid investing in the capital goods sector for the time being. Similarly, the profitability of some infrastructure companies like NCC, IRCON, and NBCC has also suffered. However, considering the government’s strong emphasis on infrastructure development, selective investments in this sector may be made at low valuations.

The 2025 budget has provided relief to income tax payers by reducing income tax, particularly for those earning up to ₹12 lakh per annum, who will no longer have to pay income tax. This move will leave middle-class individuals with extra disposable income, enabling them to spend on daily needs, home construction or repairs, vehicle purchases, and other related expenditures, ultimately benefiting these sectors.

It is worth noting that cement prices have not kept pace with other building material prices for a long time. Cement consumption is expected to increase significantly, as India’s per capita cement consumption remains much lower than that of China and even below the global average. At this point, some cement companies may be considered for investment in a staggered manner. Companies such as Ultratech Cement, JK Cement, JK Lakshmi Cement, Orient Cement (soon to be acquired by Ambuja Cement), Star Cement, and Heidelberg Cement may be viable investment options.

Additionally, the metal sector is also on the rise. Although predicting metal prices is challenging, as their fluctuations do not always correlate with the stock prices of metal companies, certain Indian metal companies are on the path to becoming global giants. From an efficiency and profit margin perspective, they can compete with any world-class company. Hindalco, Vedanta, Nalco, and Tata Steel have established themselves as leading global firms. Furthermore, Hindalco, Vedanta, and Nalco have reported excellent results in the third quarter of FY 2024-25. Given that these companies have abundant access to raw materials within India, they present strong investment opportunities. However, it is crucial to monitor commodity prices in both domestic and international markets to maximize returns. Notably, NALCO sells a significant portion of its alumina production in the international market, where alumina prices tend to fluctuate more than aluminum prices, which generally exhibit more stable movements.