The key risks to look out in 2019 for Relli's Nifty target would be continuation of Trade tiffs, resumption of bullishness in crude oil prices, continuation in rate increases by the US Fed and unstable outcome from general elections.
The year 2018 proved to be a good one for benchmark indices notwithstanding the roller-coaster moves due to crude & rupee volatility, and trade war tensions. The BSE Sensex rallied 6 percent and the Nifty 50 gained more than 3 percent after hitting life highs in January and August, in addition to the 28 percent gains in 2017.
The benchmark indices started off the year on a strong note, with the Nifty hitting a record high of 11,170 in January followed by a sharp correction to below 10K. After recovery and consolidation, the index touched a historic high of 11,760 in August followed by another sharp correction bringing it back near 10K. The follow-on sharp recovery in October and November followed by a flat close in December helped the market settle the year with over 3 percent gains.
Apart from ups and downs in crude and rupee, the heating up and subsequent cool-off of the US-China trade tensions, the IL&FS-led liquidity crisis in NBFCs, increase in Fed interest rates leading to FII outflow, worries over long-term capital gains tax, additional surveillance measures, among other things kept the market jumpy.
Brent crude oil prices surged to $86 a barrel in early October but soon fell sharply to $50 levels. Crude closed the year around $54 a barrel, down 13.5 percent in 2018.
The Indian rupee hit a historic low of 74.45 to a dollar but a steep fall in oil prices helped the currency recover to around 70 a dollar.
Global growth concerns continued to dent market sentiment in the last month of the year.
The sectoral trend was mixed during the year with IT (up 24 percent), banking (up 6 percent), Financial Services (up 11 percent) and FMCG (up 14 percent) as prominent gainers and Auto (down 23 percent), Infra (down 13 percent), Metal (down 20 percent), Pharma (down 8 percent) and Realty ( down 33 percent) as top losers.
For broader markets though, the year proved a dampener as the BSE Midcap index plunged 13 percent and Smallcap crashed 23.5 percent after a 48 percent and 59 percent upside, respectively, in the previous year.
2019 is expected to be volatile, too, but indices could hit fresh highs with Lok Sabha elections around the corner and aid from earnings performance, experts said.
"Broader market could do well especially in second half of 2019 on expectations of earnings pickup among Indian corporates post Q4FY19 along with resumption of FII flows into India around and post general election time," Dhiraj Relli, MD & CEO, HDFC Securities told Moneycontrol.
He said mutual fund inflows in India are on a structural up move driven by greater financialisation of savings. Softening stance (including a probable rate cut) by the RBI in early 2019 could help valuations, he believes.
Mutual funds continued to be net buyers in 2018 to the tune of Rs 1.12 lakh crore in addition to Rs 1.17 lakh crore in previous year. However, FIIs were net sellers, offloading Rs 25,000 crore worth of sales on a net basis after buying nearly Rs 50,000 crore in 2017.
Relli said the Nifty has the potential to touch 12,400 during 2019, which is based on various factors, namely, the expectations of an earnings pick-up in Indian corporates after Q4FY19, and the resumption of FII inflows to the Indian markets around and after the general elections.
The key risks in 2019 for his Nifty target would be the continuation of trade tiffs, resumption of a bullish trend in crude oil prices, continued rate increases by the US Fed and unstable outcome from general elections.
Overall, in the year gone by, there were more losers than gainers. Around 110 stocks ended in the green while the rest out of BSE 500 stocks were caught in the bear trap. In the case of Nifty 50, around 20 stocks helped the index close the year on a positive note while rest ended in the red.
Top 10 stocks among BSE 500 which rallied 50-140 percent were Merck, Sayaji Industries, NIIT Technologies, V-Mart Retail, L&T Technology Services, Indiabulls Integrated Services, Vinati Organics, HEG, Bata India and Larsen & Toubro Infotech.
As investors have become more choosy about governance and capital allocation decisions made by the company managements and many small-cap and mid-cap companies and even some largecap ones may fail the test of survival in an era of constant disruption – be it owing to regulations, technology or capital availability, Relli advised retail investors to learn from market moves and upskill themselves regarding the ways of the markets, and individual stocks' financials/valuations."A staggered investment in direct equities after sufficient due diligence may result in lowering their risks, in an era when the world is witnessing a paradigm shift in business models and the valuations assigned to them," he said.