The Indian equity market is down 4 per cent till date in 2018 amid a lot of volatility, making investors jittery. However, VK Sharma, Head — Private Client Group and Capital Market Strategy at HDFC Securities, looks at this as an opportunity to buy favourite stocks. He likes the insurance sector the most and SBI Life Insurance Company is his top pick in the space. Excerpts:

What questions are your clients asking? What is your advice?

Clients are asking whether we are in a bear market. We tell them an empathetic ‘No’. We are telling clients that look at the current markets as a discount sale. This is an opportunity to buy stocks that you wanted to always buy but were waiting for a correction. Now that the correction is here, go out and buy for the long term.

What clues do you get from the recent bypoll results about the BJP’s scope of winning the next general elections? Do you think the market is factoring that in?

The UP State elections we had almost gifted the 2019 elections to the BJP. But things changed after the Gujarat elections. The recent bypoll results suggest that the ruling BJP is likely to get less number of seats than what it got in 2014. The markets are factoring that uncertainty, but it is not fully priced in.

We would reiterate that that sentiment can change overnight and April 2019 is still another year away. So a drift again in favour of BJP, which is very much possible, cannot be ruled out.

Which are your favourite sectors and why? Are you comfortable with their valuations?

Our favourite sector is insurance, as it is an excellent play on our demographics (rising per capita income and population), low penetration and favourable government disposition. It is a nascent sector and companies have only recently been listed.

There is clear visible growth of around 24 per cent premium collections, which makes this sector attractive. Valuations in this sector will always appear expensive as this is a high growth sector and could get premium valuation over their global counter parts.

Which are the sectors you advise to avoid or sell, why?

We are advising investors to shun sugar stocks as it is in a downward cycle. Besides, all commodity stocks will always have to be watched for their cyclicality. You can’t buy and forget commodity stocks.

What are your top stock picks. Why?

I like SBI Life as the company has an unparalleled reach in the sector to exploit the opportunities (under-penetrated and under-insured citizens). The company has tapped only 8,000 of the 25,000 odd branches of the parent. We expect the premium to grow at a CAGR of 28 per cent for the next two years.

Another one is Century Plywood, which is a leader in the highly unorganised plywood market (75 per cent of the industry). As the GST is implemented in letter and spirit, with the e-way Bill from April 1, we expect the company to gain markets share. We expect sales and net profit to grow at a CAGR of 18 per cent and 25 per cent, respectively, for the next two years.

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