We feel that Nifty50 is likely to move in a range of 11,000 levels at the lower end of the range and 13,000 at the higher end of the range in the medium-term
The portfolio has to have robust businesses, which have a durable competitive advantage and pricing power, said Devang Mehta, Head-Equity Advisory at Centrum Wealth Management in an interview with Moneycontrol's Kshitij Anand.
"It goes without saying that the prime filter has to be good corporate governance and promoter integrity alongside the usual fundamental matrices," he added.Below are edited excerpts:
Q) What is the range you are looking at for Nifty or Sensex based on the election results? Do you think we are heading for new highs in 2019?
There are so many moving parts which will remain an overhang on the markets for some time. With uncertainty around elections out of the way, there is now a higher probability of decent inflows from the international and domestic investors which were sitting on the sidelines.
Though macros and micros are yet to see concrete traction, we feel that Nifty50 is likely to move in a range of 11,000 levels at the lower end and 13,000 at the higher end in the medium-term.
The market participants will be keen to watch the steps taken by the government to stimulate demand, boost consumption, revive capex, and ease the prevailing liquidity situation which would help in recuperating economic growth.
We remain positive on quality financials, building materials and niche capex related plays. Domestic consumption -- both discretionary and non-discretionary could see a revival.Q) As a new government takes centre stage, should investors look at select mid and small-caps for the next five years?
A number of mid-cap businesses have done the hard work of maintaining market share and have adhered to financial discipline in an extremely challenging environment for the last one-year or so.
Some of these are still available below fair valuation and appropriate price points. Our strategy is to buy market leaders across the spectrum of sectors as well as market capitalisation.
Polarisation and dominance of only certain stocks was the story so far. Going forward, there is a good probability of broader participation from high quality mid and small-caps.Q) What would be your advice to investors for the next five years who are probably starting their journey with this new government at the centre?
With political uncertainty out of the way, the focus of new investors should be on the realignment of their portfolios with the themes that will play out for the next five years.
The portfolio has to have robust businesses, which have durable competitive advantage and pricing power. It goes without saying that the prime filter has to be good corporate governance and promoter integrity alongside the usual fundamental matrices.Q) What are the top five fundamentally strong stocks which investors can look buying at for the next five years?We have successfully been able to understand and dissect certain themes, which will be the pillars of market growth and wealth creation.
Financialisation of savings is one such theme. Top private banks, both corporate and retail, life & general insurance, Consumer NBFC’s, as well as AMCs, could see a good time ahead as there is a huge market opportunity and severe under penetration.
Also, if rural distress and issues related to farm income growth are resolved, we may see consumption revival which benefits consumer companies and agri stocks, etc.
The cliché theme of formalisation can also work in investors' favour as there will be a definitive shift from unorganised to organised, where established players will get stronger by the day. In the end, just remember one thing, market is a slave of earnings. Consistent performers with prudent management and robust growth will always command a premium valuation.Disclaimer: 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.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.