Moneycontrol
May 24, 2017 03:26 PM IST | Source: Moneycontrol.com

Acche din abhi baaki hain! D-Street prepares for Modi 2.0; Nifty to hit mount 14K in 2 years: Poll

A Moneycontrol poll of 15 analysts, which include fund managers and economists rated the government’s overall performance in handling the economy and initiation of reforms at 7.25 out of 10

The last three years of Modi-led government has not disappointed investors as over 1,000 stocks more than doubled investors’ wealth in the same period. The euphoria might not get over by 2019 as most D-Street analysts see Modi-2.0.

The party is not over yet as the majority of market mavens expect the rally to stretch up to 14K in the next 2 years of Modi government as the likelihood of Modi 2.0 keeps the bullish sentiment going.

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Almost 92 percent of participants see Modi government coming back with a majority in general elections to be held in the year 2019. The reform process which the government started in the last 3 years is likely to bear fruits in the next two years of the government rule.

“There is a lot of exuberance in the market. We see government returning to power in next general election to be held in 2019,” Dhananjay Sinha, Head of Research, Economist & strategist at Emkay Global told Moneycontrol.

The government has already expedited key reforms around one nation one tax, land, real estate, banking as well as digital. The economy has quickly recovered from demonetization and now remonetization is contributing substantially to economic growth.

“As the Modi government enters the fourth year, the economy is in a much better shape. In the emerging markets, India is in a macro sweet spot. Indian GDP growth in 2017-18 estimated to rise to 7.4 percent is likely to be the highest among large economies in the world,” V K Vijayakumar, Chief Investment Strategist, Geojit Financial Services told Moneycontrol.

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Equity markets usually track economic growth of the country is likely to hit new highs. If India is growing at the fastest pace among major developed economies then big rally on D-Street cannot be ruled out.

Benchmark indices rose to a fresh record high on the day when the government celebrated its third anniversary of the announcement of BJP’s historic election victory.

The S&P BSE Sensex has already rallied 27 percent, while the Nifty gained a little over 32 percent since May 16, 2014, when election results were declared helped by strong domestic and global liquidity.

Foreign institutional investors (FIIs) have pumped in over Rs 1.50 lakh crore in Indian equities in the past three years while domestic institutional investors (DIIs) have poured in close to Rs1.8 lakh crore into stocks in the same period.

A Moneycontrol poll of 15 analysts which include fund managers and economists rated the government overall performance in handling the economy and initiation of reforms at 7.25 out of 10.

“India remains one of the fastest growing major economy, together with lower interest rates and strong demographics, Indian economy should do well going forward,” Vaibhav Agrawal, Head of Research & ARQ, Angel Broking said.

“Our valuation, which is at a premium at the historical average, indicate the future growth expectations and we believe that the economy has a lot of steam left in it,” he said.

However, the Street remains divided on the performance of Nifty. Almost 76 percent of poll participants see Nifty scaling above 10K in the next two years and possibly hit mount 14K by 2019.

Almost 38 percent of participants see Nifty above 10,000 while another 39 percent see Nifty in the range of 12,000-14,000.

Indian market is in a structural bull run and intermittent corrections cannot be ruled out. However, investors will be better off by investing in largecaps which are likely to lead next leg of the rally.

Almost 86 percent of participants see largecaps offering the best risk-to-reward ratio for investors after a sharp rally seen in the mid and smallcap stocks.

“Headline indices are recording continuous new highs on the back of slightly better than expected earnings season so far. Markets are clearly discounting earning growth in high teens at these valuations,” Rakesh Tarway, Head – Research, Reliance Securities told Moneycontrol.

“Now, earnings need to catch up with valuations in FY2018 for a meaningful return from equity markets,” he said.
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