This year is going to be a very rewarding year for bottom up investors, however the word of caution remains that one should be sticking to liquid and high quality names.
We expect 11,700-11,800 as a strong base for Nifty going forward and 2020 is likely to offer a lot of opportunities to the investors in the market, where a bottom-up approach is likely to be dominating theme, Himanshu Gupta, VP Research at Globe Capital Markets said in an interview to Moneycontrol's Sunil Shankar Matkar.
Do you expect the positive momentum to continue till Budget 2020 and after that?
Yes the positive momentum is likely to be seen at least till Budget where Nifty can test levels of 12,700-12,800. The mood thereafter is likely to take cues from the Q4 earnings and the policy announcements.
Budget in general does not have very long lasting impact on market but yes in the short term volatility can surge around the event. Since the government has already announced a number of reforms over the last few months including the big corporate tax rate cut, one should keep expectations low as far as new announcements are concerned, given the tight rope of fiscal deficit that the government is walking on.
Also, at some point of time this market will pause and correct as the Nifty has been on a steady rise all the way from 10,700 odd levels. We expect 11,700-11,800 as a strong base for Nifty going forward and 2020 is likely to offer a lot of opportunities to the investors in the wider market, where a bottom up approach is likely to be dominating theme.
What are your top five expectations from the Union Budget?
We would like the government to announce measures to stimulate the demand on the ground. Opening the tap of government spending in whatever possible way is the need of the hour, given the growth rate plummeting to 11 year lows. Allocation towards schemes like MNREGA/ NREGA should be increased substantially which create employment opportunities in rural India, where the demand is seen taking a back seat in last few quarters.
We would also like a reduction in the income tax on individual so that more money is left at the disposal of the middle and upper middle class. Also rolling back long term capital gains tax and dividend distribution tax is something that would give a big boost to the investors and attract a lot of fresh buying in financial markets gradually.
Real estate is a sector which supports a large number of industries. Some important announcements have been made in the last few months to give a boost to this sector but we still believe that the demand is still benign. We would like fresh announcement to incentivize home buyers that could bridge the supply glut and increase the demand.
Manufacturing and Agriculture are two pockets of huge potential for a nation like India. Government needs to incentivize and attract more foreign investments in these sectors which can significantly boost the growth and provide a massive employment opportunity.
Will the government be able to meet its fiscal deficit target?
I think markets are not particularly worried about fiscal deficit number at this point of time, however, the market would like that amount to be spent towards stimulating the growth.
In our view markets are factoring in a 50- 75 bps loosening in the number already. Given the fact that the debt to GDP is at comfortable levels considering the past and compared to other nations, I think the government should not be too worried about achieving the target in this fiscal year.
As broader markets (midcap, small cap) started performing well since the beginning of 2020, do you feel it would be better year for them than large caps compared to last two years, and why?
Yes we firmly believe that there is much more to come in midcaps and smallcaps this year. The correction in this space started from 2018 and has lasted for almost 1 and a half year. The rationale remains, first the valuations have reached to comfortable level, however with the recent sharp rally seen already in last two months they are not as cheap as they were, but still look attractive.
Second, the overall risk sentiment globally has seen improving over past few quarters, given the accommodative stance by most of the central bankers across the globe that would offer more confidence to the investors to invest in these pockets and ample liquidity will ensure high returns in mid/small caps. This year is going to be a very rewarding year for bottom up investors, however the word of caution remains that one should be sticking to liquid and high quality names.
Q: What are top three sectors to bet on in 2020 and what should be your pecking order, and why?
Pharma - The sector has undergone a long underperformance and it looks like the worst in terms of regulatory issues from US is behind. We expect margin improvements with a sustained volume growth for the sector. Given the under ownership in the sector we expect a
Cement - The sector is expected to benefit from pickup in demand and new capacity building up. We also expect the players to benefit from a rise in prices that would help the bottom line to improve. The increased spending by the government in the infra projects will also benefit the sector
Private banks - Privates sector banks are expected to benefit from improved technology, better loan growth and higher provisioning for bad loans in past few quarters.
Q: What are your top five bets which could give more than 20 percent return by end of 2020?
DLF is India’s largest real estate developer. For the quarter ended 30-09-2019, the company has reported a Consolidated sales of Rs 1,715.51 Crore, up 28.87 percent from last quarter sales of Rs 1,331.19 crore and down 19.80 percent from last year same quarter sales of Rs 2,139.03 crore.
We believe that the Rs 12,000-crore inventory should liquidate in a three-four year period, depending on the pace of sale. We maintain buy rating after posting an encouraging quarter.
ICICI Prudential is promoted by ICICI Bank and Prudential Corporation Holdings. It commenced operations in 2001 and has consistently been one of the leading private sector life insurance companies in India. It was the first private sector life insurer to cross the Rs 1 trillion mark in assets under management (AUM).
Its current total sum assured has crossed Rs 11 trillion. Its presence across channels ensures that it is able to cater to the varied needs of customers across all touch points.
Sun Pharma is the 4th largest global specialty generic company. It has 44 manufacturing sites across the world. The company is enhancing their share of specialty business globally. At the CMP of Rs 454, the stock is trading at P/E multiple of 25x.
JSW is the first company to manufacture high-strength and advanced high-end steel products for its automotive segments.
As a leader in India’s steel industry, we recommend to buy at current price and accumulate on decline. At the CMP of Rs 273, the stock is trading at P/E multiple of 9.8x only.
ACC is India's foremost manufacturer of cement and ready mixed concrete with a countrywide network of factories and marketing offices. Established in 1936, it has been a pioneer and trend-setter in cement and concrete technology. Its brand name is synonymous with cement and enjoys a high level of equity in the Indian market.
On expectations that the government's recent push towards infrastructure creation will lead to price hike of cement on the back of increased demand. At the CMP of Rs 1,512, the stock is trading at attractive rate.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.