Improvement in the macro environment does have a positive impact on equities. Easing of crude oil prices, stability in rupee and its possible fallout on monetary policy has aided sentiments.
We generally do not give near-term index targets, but we do see a scope for 12-15% appreciation in benchmark indices over the next one year, Gaurav Dua, Head of Research, Sharekhan, a subsidiary of BNP Paribas, said in an interview with Moneycontrol’s Kshitij Anand.
Q) What is the sense you are getting from markets? Do you think that the recent bounce was largely on the back of rupee appreciation and fall in crude oil prices and the rally is short-lived?
A) Improvement in the macro environment does have a positive impact on equities. Easing of crude oil prices, stability in rupee and its possible fallout on monetary policy has aided sentiments.
Along with domestic macro factors, the sentiments in the Indian equity market has also been aided by the recent rally across emerging markets due to signs of peaking out of the continuous strengthening of the US Dollar.
The weakness in the US Dollar is always positive for foreign inflows into emerging markets. Our base case is that the market could slip into a consolidation phase around the current levels.
Q) What are the sectors according to you are recommending to your clients and why? And, name one sector which investors can’t afford to miss to be in for the year 2019?
A) For the past 3-6 months, we have been advocating a shift of some of the allocation from NBFCs to leading private sector corporate lending banks.
We are overweight on IT services and pharma sectors. Lastly, we continue to retain positive stance on consumer space though one should be selective in consumer staples.
Q) What is your target for Nifty for the FY19?
A) We generally do not give near-term index targets. However, we see scope for 12-15% appreciation in benchmark indices over the next one year. In individual companies, we see an opportunity to make much higher returns over the next 12-18 months.
Q) Any top five stocks which you consider are a good buy at current levels after the recent fall from highs for a holding period of 1-2 years?
Q) Well we are now past Diwali and approaching Christmas. But, the crucial question is that after seeing September quarter results, do you think Santa might just grant our wish for pick up in earnings in December quarter. Most brokerages firms have downgraded Nifty EPS for FY19?
A) In Q2 results season, the downgrade in consensus estimates by 4-5 percent for FY2019 earnings is a worrying factor. The margin pressure due to input cost inflation and risk to growth from challenges faced by NBFCs has emerged as concerning factors for earnings growth.
However, on the brighter side, the signs of peaking out of asset quality issues in corporate lending private sector banks like ICICI Bank and Axis Bank is the key positive takeaway from Q2 results.
Going ahead, the earnings growth is likely to pick up but might still be lower than the downgraded consensus estimates of 13-14 percent growth rate.
Q) What are your expectations from the upcoming RBI policy meet in December?
A) Going by the softness in consumer inflation and easing of crude oil prices, we expect RBI to maintain status quo on policy interest rates in its review meeting in December.
We would also expect the regulator to possible reduce CRR requirements to provide sufficient liquidity in the banking system.
Q) Given sudden appreciation in rupee, do you it is time to re-look at IT and pharma? Most of the stocks are already trading either above or around fair valuations?
A) We do not expect the rupee to appreciate significantly from the current levels which are high enough to provide a boost to IT Services and pharma sectors.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.