The volatility seen in equity markets this year is expected to dissipate in 2020, according to Anoop Bhaskar, Head Equities, IDFC Mutual Fund.
"Everyone is hoping that 2020 will see a revival of the broader market. This hope comes from valuation gap, which we're seeing today in the broader market versus the 70 stocks," Bhaskar said.
He further explained that if one looks at the BSE 100 index, there are only 34 stocks which are positive and 36 are negative.
"So, this gap in valuation between the winners and the ones which have been held back is wide and hope that valuation will be a big factor," Bhaskar said.
Bhaskar pointed out that for markets to move, market cycle needs to change. He said to support valuations, there is a requirement for 'gush of liquidity'.
"The sentiment will be provided by the government as they come out and follow up with the reforms that they announced in August and more reforms on the personal taxation side or on the capital gains side. There is also a need for liquidity to improve because the banking sector has shrunk. The lending has got impacted significantly in the last nine months and the lack of liquidity in the system has been one of the biggest factors that we are not seeing enough lending," he said.
He said that although liquidity in the system has improved, the RBI needs to take more measures.
"So, if we look at the sequence of 2020, it will start with sentiments which will be boosted by liquidity. And then there has to be a follow up in terms of fundamental, by the second half of 2020, for all this to showcase to us we will know that the broader market has turned around," he added.
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