We believe that FY19 will see individual growth stocks doing well, but overall, Nifty is likely to deliver a muted return for investors, Prasanth Prabhakaran, Senior President and CEO, Yes Securities said in an exclusive interview with Moneycontrol’s Kshitij Anand.
How are fears of trade wars likely to play out for Indian markets in FY19? Which sectors are likely to see the worst of it?
India seems to be less at risk from the global trade war. Hardly 15 percent of India’s GDP is contributed by exports. The US accounts for only around 10 percent of India’s steel and aluminum exports.
Further, exports from India to China and Hong Kong constitute only about 10 percent of the total Indian exports. Hence, India may not see a drastic impact despite the slowing Chinese economy.
However, some sectors could see a short-term impact because of the US protectionist measures; especially IT and Pharma companies which have overexposure to the US markets.
FY18 closed with gains of about 11 percent thanks to domestic liquidity. Do you think the momentum will continue in FY19 as well?
We believe that FY19, would be a year for individual growth stocks which will continue to do well, but overall Nifty is likely to deliver a muted return for investors. It is time to focus on select stocks rather than the headline indices.
It is also pertinent to note that apart from the high valuations that the Indian markets were trading at, it will also be a busy year – with elections around the corner for select major states and the impending General election.
In the short run, there will be a lot of noise which could spook the market. However, as long as the earnings growth revival that the market is displaying for the last two quarters continue, there would be substantial returns that the Indian markets would deliver over the long run.
What is your index target for the financial year 2019? Do you think the index will be able to reclaim 12000 on Nifty?
We believe that it would be very difficult for the benchmarks to make new highs anytime soon. The general markets would tend to gyrate between a broad range of 9800-10600 on the Nifty. Multiple events would bring about heightened levels of volatility.
Which sectors are likely to hog the limelight in the coming financial year and why?
Sectors and themes that we like for the next FY include stocks positively affected by
1. agriculture led government spending,
2. infrastructure led public capex spending
3. Indian consumption story.
Do you see Modi returning to power in 2019 and how are markets likely to react?
We tend to believe that the Indian capital markets have managed to give a CAGR return of 14 percent over the last two decades, irrespective of events like elections, scams, wars, droughts, floods, etc.
Hence, as long as one continues to hold good fundamental stocks in growth sectors and run by a top class management, an investor would continue to get large benefits from the Indian growth story.
Do you think the uptrend for mid & smallcaps will continue in the next financial year? If yes, why?
As mentioned earlier too, returns that an investor makes in the market are purely based on the quality of stock that one holds in one’s portfolio. Irrespective of the market cap of a company, as long as there is a disconnect between actual earnings and valuations, there would be upgrades or downgrades in a stock. We continue to believe that a bottom up approach is warranted in building one’s portfolio.
What should be the portfolio composition of investors in the coming financial year assuming he is in the age bracket of 35-40 years?
100 minus age rule is the simplest way to determine asset allocation but it does not consider a lot of important factors like risk profile, personal liabilities etc.
For example, based on the same principle, a 40-year-old investor should invest 60 percent in equity and 40 percent in debt.
However, goal-based investing is more scientific and works best when combined with a dynamic portfolio strategy. All one has to do is to identify one’s goals and a time horizon to achieve them.
Do you think earnings is likely to bounce back in double digits in FY19?
We expect earnings to grow by ~12-15% over FY19.
Some analyst was telling in an interview that India is now part of Expensive 4 in terms of valuations. Do you agree with the statement? Do you FIIs flows coming down in light of constant rate hikes by the US Fed and rising US bond yields?
In the last few years, FII inflows have been dull based on the expensive valuations that Indian markets traded with, in FY18. However, what has kept the market firm is the domestic flows and that is where the focus should be. Going by history, if such funds dry up (due to expectation mismatch) then it would be a bigger concern than FII inflows.
How should investors play PSU banks in FY19 given that we are seeing new frauds from different banks almost on a daily basis?
We believe it would be better to take the ‘better to be safe than sorry’ approach and avoid investing in PSU banks given the legacy issues that these banks face.
Until the time such banks have a more defined growth path for capital raising, subsequently affecting their credit off-take; it is better to ‘avoid’.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
