'After current run, market likely to consolidate; bet on these 3 sectors for 1-3 years'

Sensex_Nifty

The market has been inching higher amid intermittent consolidation with the Nifty hitting psychological 11,600-mark for the first time in the passing week driven by select stocks like Reliance Industries and L&T.

Midcaps also participated in the rally with BSE Midcap index gaining 1.5 percent, but Smallcap index closed flat.

"Overall the market rally is driven by select stocks, mostly largecaps as corporate earnings began to do better due to base effect of GST and demonetisation disruption," Ratnesh Kumar - Managing Director & CEO - BOB Capital Markets told CNBC-TV18.

The market is ignoring headwinds like rupee, crude oil price volatility and elections ahead. "It means improved corporate fundamentals overtook macro factors," he said.

He sees moderate or subdued kind of market returns in 2018 compared to 2017 when frontline indices rallied around 29 percent.

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Ratnesh Kumar

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"Corporate earnings seem to have been priced in by the market, citing factors like dollar, crude oil, and political events over next 6-8 months. So returns could be 5-10 percent and we see consolidation for the market now," Ratnesh Kumar said.

Earnings

On the earnings front, "we see 15-20 percent kind of growth in FY19 as we saw growth in Q1FY19 despite one-off factor," Ratnesh said.

He feels in the next three quarters, banks performance will be getting better while natural growth is coming in other sectors.

Corporate Banks

In the banking sector, provisioning was quite higher in last 4-5 quarters due to change in regulations, which seems to have picked up now, he said. "We are seeing beginning of next 12 months will be vastly different compared to previous 12 months. Even growth numbers will be strong compared to previous 12 months, so banking can see outperformance over 1 year."

Housing and Real Estate

Ratnesh said one of the themes he wants to play going forward would be real estate and housing sector as he sees huge shift in both sectors on the back of RERA. "Strong developers are getting sector organised, so we are hoping for trust factor coming back."

He feels real estate is a great play for over 3 years on the infrastructure front. "Bet on quality developers after current consolidation in the industry."

Home building segment also looks pretty well poised for next 1-2 years, he said.