The Nifty50 which rose to a fresh record high of 10,191 just ahead of Diwali week may come under pressure and could well move below 10,000 by December 2017, according to a poll conducted by Moneycontrol over the week which comprised of 18 CIOs, HORs, and fund managers.
There is a sense of caution as valuations remain high and the recent macro data is raising questions on the stable macro picture which India had among other key emerging markets. The current euphoria is unlikely to fuel the momentum going forward, suggest experts.
The poll showed that 61 percent of the poll respondents agree that the market is overvalued while the rest 33 percent say that it is still fairly valued and the rest 6 percent declined to comment.
The Nifty50 which has already risen over 20 percent so far in the year 2017 could witness some slowdown and move below its crucial support level of 10,000 by December 2017.
Almost 47 percent of the poll respondents agree that the Nifty50 index could witness some correction and move below its crucial support level of 10K while the rest 53 percent feel that it could move in the range of 10,000 to 10,500.
“As certain critical parameters are broken down on the charts, medium-term trend is deteriorating,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in told Moneycontrol.
“Hence, in the best case our target will remain in the zone of 10500 – 10600 levels whereas on a breakdown below 9685 we look for targets placed around 9200 on the downside,” he said.
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For Sensex, about 31 percent of the poll respondents feel that the S&P BSE Sensex could hover in the range of 30,000 to 32,000 while 25 percent or 4 out of 16 analysts feel that the index could slip below 30,000.
Only one fourth or 25 percent of the poll respondents feel that the S&P BSE Sensex could climb mount 33K by December end.
One big reason why analysts are turning cautious could be persistent selling by foreign investors which are now slowly moving towards other emerging markets. Apart from receding flows, mixed macro data and muted corporate earnings growth is weighing on sentiment.
Almost 44 percent of the poll respondents do not feel that September quarter earnings growth will be worse than Q1 but it does remain as a crucial area of concerns. If earnings growth fails to pick up chance are we will head for a big correction.
The September quarter will not be as bad as Q1 but 94 percent of the poll respondents see weak corporate earnings growth as a bigger near-term threat to markets while the rest feel US Fed rate hike.
In the past two months, they have sold equities worth USD 3.7 billion, but in the seven months till July, foreign portfolio investors (FPIs) invested close to USD 8.8 billion in Indian equities, suggest a report.
The domestic institutional investors (DIIs) saved the day for India equity markets but the momentum or the quantum of investment is also receding but almost 55 percent of the respondents feel that MF flows should hold the market in case foreign investors trigger selling.
Smallcap Stocks:
The S&P BSE Smallcap index rose to a fresh record high last week but analysts tracking the broader market are growing cautious in this space. They recommend investors to book profits in select stocks where valuation look stretched, but there will be continued interest in this space.
Almost 61 percent of the poll respondents feel that investors should book profits or sell 50 percent of their holding in the small and midcap space.
While the rest 22 percent feel that investors can still hold on to them as upside remains intact while 17 percent declined to comment.
“Earnings growth in FY18 is likely to be subdued. In our view, further upsides from the current levels would be contingent on the revival of earnings growth and resolution of stressed banking assets,” Kotak Securities said in a note.
“We expect returns in Samvat 2074 to moderate in view of weak near-term earnings growth and higher than average valuations. Having said that, we believe, there would be continued investor interest in mid and small caps,” it said.
Poll Respondents:
>Rishi Kohli, CEO, Pro Alpha Capital
>J.K.Jain, Equity research head at Karvy Stock Broking
>AK Prabhakar, HoR, IDBI Capital
>Ambareesh Baliga, Independent Market Expert
>Jimeet Modi, CEO at Samco Securities
>Ajay Bodke, CEO & Chief Portfolio Manager (PMS) at Prabhudas Lilladher Pvt. Ltd
>Hemang Jani, Head – Advisory, Sharekhan
>Siddhartha Khemka, Head – Equity Research (Wealth), Centrum Broking Limited
>Nikhil Kamath, Co-Founder & Head of Trading, Zerodha
>Dinesh Rohira, Founder & CEO, 5nance.com
>Sumeet Bagadia Associate Director Choice Broking
>Nitasha Shankar, Sr. Vice President and Head of Research, YES Securities (I) Ltd.
>Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, Chartviewindia.in
>Dyneshwar Padwal, AVP-Technical Analyst – KIFS Trade Capital
>Aneesh Srivastava, CIO, IDBI Federal Life Insurance.
>Shibani Kurian, Sr. Vice President and Head of Equity Research, Kotak Mutual Fund
>Alok Ranjan, Head – PMS, Way2Wealth Brokers
>Vijay Singhania, founder-director, Trade Smart Online
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