We can be sure of a stronger single party opposition compared to 2014 which is good for a democracy, says the independent market expert
Whether Modi is able to course-correct or Congress builds on this massive victory – needs to be seen, but we can be sure of a stronger single party opposition compared to 2014 which is good for democracy, Ambareesh Baliga, independent market expert, said in an interview with Moneycontrol’s Kshitij Anand.
Q) After a stable 2018, we started 2019 on a slightly muted note. What are your expectations from the New Year?
A) Well, I am positive in 2019. Being an election year, I expect a government which would support the economy. The latest election trend shows that Congress has been able to rejuvenate itself – either on its own or as a fall back for those who are not happy with the incumbent government.
On the other hand, the recent setback for BJP could get them to take note of the issues facing the electorate and take corrective steps in the short period they have in the run-up to the elections.
Thus it could be a close fight for the two major parties. As long as there is a simple majority and a stable government which is not anti-business, the markets would take it well.
Secondly, unlike 2014, we may have a strong and relevant opposition, which will ensure that the government delivers.
On the global front, I expect oil to remain range bound or possibly correct further. The Indian rupee too should be stable or appreciate especially with the number bi-lateral rupee trade pacts and the oil pressure reducing. The US-China trade-war should finally settle. We would also have certainty on Brexit front by early 2019.
Q) Speaking of upcoming general elections, do you think that PM Narendra Modi’s popularity going down?
A) The results show that Modi’s popularity is certainly down but in terms of percentage of votes, it’s still significant and there is a high probability of a course correction by the incumbent Government.
Unlike in 2014, there is no Modi wave, but an anti-Modi wave could be thwarted through corrective action in the remaining few months.
Q) Is market pricing in Modi returning to power in 2019? If not, then in case Congress comes or we have a coalition government, do you think we could see more pressure?
A) With the recent assembly results, the possibility of a weak coalition government seems reduced. Thus it could either be a BJP-led or a Congress-led government, though Congress will have more partners.
Now, whether Modi is able to course-correct or Congress builds on this massive victory needs to be seen. However, we can be sure of a stronger single party opposition compared to 2014 which is good for a democracy.
Q) What are your target for 2019 for Sensex or Nifty and why?
A) As mentioned earlier, a stable government is expected to boost the markets and we should see Nifty crossing 12500. The earnings should also start showing a decent uptick from Q1 FY20 providing the much-needed support for the markets.
Q) The broader market remained under pressure in 2018. After the recent correction, do you think much of the froth is out and investors can again look at the mid and the small-caps in the year 2019?
A) Yes, most of the froth seems out. The stocks with questionable antecedents have anyways fallen off the radar. Among the others, it is a good opportunity for stock pickers.
Q) Top five stocks you think are good buying ideas with a target price for the year 2019?
A) Here is a list of top 4 stocks that we have on our radar for 2019:
UPL: Buy| Target: Rs 940
UPL is among the largest one-stop crop protection solution providers. UPL is well poised to benefit from the attractive prospects in LATAM. Europe is expected to emerge as a major growth driver over the medium term, especially post the Arysta LifeScience amalgamation.
Both UPL and Arysta complement each other well in terms of their crop portfolio and geographical presence. The combined entity, thus, would become the fifth largest agrochemicals player in the world. We have a price target of 940.
JK Lakshmi Cement Ltd: Buy| Target: Rs 480
JK Lakshmi Cement (JKL) has doubled its capacity from 5.3MTPA to 10.7 MTPA since FY14, and this is expected to go up to 11.3 MTPA by FY19.
Capacity utilisation of sub-70 percent gives JKL significant headroom to grow. Additionally, the company has 6MTPA of expansion potential across its existing plants. On the back of this, we expect volumes to record 8 percent CAGR over FY17-20E.
JKL’s cost efficiency parameters are comparable with the best in the industry. JKL has commissioned 7.5MW of waste heat recovery (WHR) and is in the process of commissioning 20MW through a captive power plant by FY19 at its facility in the East (25% of total capacity).
The management expects costs saving of Rs 180-200/t from these projects, translating into an impact of Rs 50-60/t on reported EBITDA/t. We expect a target price of 480.
BSE: Buy| Target: Rs 1080
The oldest stock exchange in Asia has strong traction in new business initiatives. The company witnessed a strong business (average daily turnover) growth of 90 percent and 1387 percent in its currency derivatives and India International Exchange (IFSC) Limited ‘India INX’ segments to Rs. 32,668 crore and $630 million, respectively, for H1FY2019.
The exchange also introduced the commodity derivative segment on October 1, 2018, and became the first universal exchange in India offering one-stop solutions for all financial needs.
The company is also setting up a new power exchange in association with PTC India and ICICI Bank. The company has been launching various product offerings by entering into domestic and international tie-ups for related product launches to enhance and keep its business in momentum despite stiff competition. However, management believes this as an investment that will pay off in the medium to long run.
Ashok Leyland Ltd: Buy| Target: Rs 170
CV demand to continue growing in FY19 and FY20, driven by continued momentum in infrastructure, agriculture, pick-up in industrial activity, and pre-buy ahead of BS6 implementation. Moreover, mandatory scrapping of trucks should benefit CV demand beyond FY20.
Volume growth momentum to weaken over the next 3-6 months, partly impacted by the high base of last year as well as potential impact of liquidity issues surrounding NBFCs. AL is focused on expanding and creating new revenue and profit pools.
De-risking of the M&HCV business, along with the expansion of a nascent business like spares, exports and defense is the key focus area. Structural changes in balance sheet and de-risking of the business model are expected to result in increased free cash flow. Our target price is 170
Q) What is the mood of FIIs? Will the recent friction between the govt and the RBI will lead to some loss of credibility and weigh on sentiment?
A) The swift appointment of a Mr. Shaktikanta Das as the new Governor and proactive communication from him in the first few days seems positive.
Now, if he is seen ensuring the independence of RBI and is able to deliver in the next few months, it should help bring back the credibility of the institution.
Secondly, FIIs look at performing markets. If we have a good 2019, with a stable government and economic outlook, FIIs will automatically get back to investing in India.
Q) Do you see more populist measure coming up ahead of elections which could boost consumption but weigh on the fiscal deficit?
A) The populist measure though a concern for the longer-term fiscal discipline may be taken by positively by the street as it would be seen as a measure to ensure continuity of the Government.
Q) You said that rupee should appreciate against the USD. Any specific levels which investors should keep an eye on?
A) Yes, as I mentioned earlier, the rupee is likely to remain stable or possibly appreciating due to the oil holding at current levels or even declining due to slowing demand scenario.
The rupee pact for bi-lateral trades which India has signed off in the recent past with the trading partner will also stand in good stead for the Rupee. I also expect the exports to have a better show in 2019.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.The Great Diwali Discount!
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