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Nov 10, 2017 02:18 PM IST | Source:

Rally in midcaps unlikely to end soon; Sensex to end 2017 with over 25% gains: Motilal Oswal

The Indian market could end 2017 with gains over 25 percent, compared to a flat 2016, with supportive positive macroeconomic factors.

Kshitij Anand @kshanand

The Indian market could end 2017 with gains over 25 percent, compared to a flat 2016, with supportive positive macroeconomic factors, Yogesh Mehta, VP-Retail Research, MOSL, said in an exclusive interview with Moneycontrol’s Kshitij Anand.

Q) Markets retreated slightly from fresh record highs this week. What is your call on the market for the rest of 2017? Are we likely to end 2017 with gains over 20% compared to a flat 2016?

A) Well, the market rally is likely to continue for the rest of 2017 and scale fresh highs. It could end 2017 with gains over 25 percent compared to flat 2016 with supportive positive macroeconomic factors.

Mid & smallcaps rose to fresh record highs in November, which was largely in-line with benchmark indices? Is the rally likely to continue or investors are better off booking profits?

A) Mid and small cap indices are outperforming the Nifty and scaling new highs. The rally in these segments is likely to continue further as interest in these companies is getting more attention from investors to generate better returns than traditional banks FD or bonds, which have very low yield.

Q) Bank recapitalisation – a smart move by the govt? Do you think it reverses fortunes of public sector banks and could also lead to an upgrade by global rating agencies?

A) This move will help address the perennial capital constraints facing the PSU banks and also enable these banks to make the required provisions, thereby expediting the NPL resolution process.

The government’s intent to clean up the banks and kick-start the lending process appears very strong and thus we believe that the recapitalization/clean-up initiative would remain a recurring theme over the next few quarters.

Q) Two sectors which you think could emerge as a dark horse in the next 1-2 years and why?

A) Cement sector seems to be the dark horse in next 2-3 years as the government focuses on projects like infrastructure (like highways, bridges, dams etc.), smart cities, affordable housing etc. will create demand in this sector and the capacities are already set for meeting the upcoming demand.

Q) Recent data suggests that fund managers have started paring their position from stocks which have already more than doubled investors’ wealth in 2017? Is it a smart move and retail investors should also start doing that with respect to their portfolio?

A) If the data suggests of paring position in an investment where fund managers made 200% is because funds are based on performance comparison, retail investor should not follow such practice for their portfolio better stick to the holdings where they have the confidence of the company performance is high.

Q) Will poll outcome in two major states have a bearing on markets? Do you think it will be a litmus test of the government ahead of 2019 general elections?

A) Yes, indeed it’s a litmus test for 2019 general election, but it is almost a win for the ruling party in these states.

Q) How are earnings panning out in the September quarter? Do you think earnings will be back in double digits?

A) So far, earnings are as per expectation as GST rollout had already lowered down the growth expectation. It is likely to return in double digits in next 2 quarters.
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