With close to 30 per cent returns, 2014 has been a phenomenal year for the markets. Equities have created some serious wealth for investors. There is an expectation that macro factors and the general business environment will be better in 2015, giving a much required boost to corporate margins.

While the general multi-year outlook is still bullish, 2015 may not be as spectacular as last year. Market momentum could take a breather this year, consolidating the gains made in 2014. The year 2015 could be a year of business consolidation as well.

Analyse corporate actions In the backdrop of consolidation, taking a direction bet could be a bit tricky. However, special situation arbitrage may throw open few interesting opportunities to market participants. It would be rewarding to analyse corporate actions such as M&A deals, buybacks by parent companies, and changes in management. Additionally, one also needs to watch out for businesses that will get affected by policy changes. Needless to say, arbitrage opportunities would vary and not all of them could be worth considering. One needs to put in the required due diligence drill to separate the rewarding opportunities from lacklustre ones.

There could be a few sector-specific stock picking opportunities in 2015. Two sectors that will be in focus would be banking and auto ancillary. There is an urgent need for organised banking, and I believe the government is taking the necessary steps to address this issue. The Pradhan Mantri Jan Dhan Yojana is just one such step in that direction.

There is an immense potential for growth in organised banking in semi-urban and rural areas. The bet on auto ancillary stems from a simple thesis. Over the last four-five years several million vehicles (two-wheelers, passenger cars and commercial vehicles) have been sold. Generally, around the fourth year of vehicle ownership, the need to replace auto parts increases; added to this is the state of roads, and hence the case for auto parts replacement strengthens.

Advantage, auto ancillary The record number of vehicles that were sold around four-five years ago is now primed up in this context. Auto ancillary firms catering to the replacement market are best positioned to benefit from the anticipated auto spare part replacement surge.

(The writer is Founder & CEO, Zerodha)

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