The dark horse bet for 2019 would be sugar sector. The policy change to allow sugar mills to produce Ethanol directly without going through the traditional route of producing sugar is a “game-changer”.
The holding companies generally tend to outperform the underlying ones in a bull market. Thus, with a 2-year view, one should look at buying holding companies of strong groups, Ambareesh Baliga, independent market expert, said in an interview with Moneycontrol’s Kshitij Anand.
Q) After a muted 2018, what are your predictions for the year 2019?
A) The initial period of 2019 would be lackluster unless one witnesses a fresh pro-BJP wave which seems remote as of now. We should see a decisive move post general elections — which could be either up or down depending on the outcome. Broadly there could be three scenarios –
1) BJP/NDA managing a workable majority: The markets will bounce back and we could witness a sharp rally. Could lead to a new high in 2019.
2) Congress forming the government with dependable allies – A knee-jerk reaction which would be limited leading to normalisation of the markets in a few months
3) An unstable weak formation: Markets will correct sharply and seek lower levels
Q) Any sector(s) which you think could turn out to be a dark horse in 2019?
A) The dark horse bet for 2019 would be sugar sector. I believe the policy change to allow sugar mills to produce ethanol directly without going through the traditional route of producing sugar is a “game-changer”.
With increased blending, the sugar mills will have a greater control over their operations. Secondly, I don’t believe the fortunes of Ethanol will depend only on the oil price as environmental considerations and the forex savings will ensure it remains in focus.
I would also suggest retail investors look at holding companies which have corrected sharply and most of them are quoting at more than 60 percent discount to the underlying.
The holding companies generally tend to outperform the underlying in a bull market. Thus, with a 2-year view, one should look to buy holding companies of strong groups.
One such pick is Pilani Investments. It is a holding company of the Birla Group having blue-chip investments like Century Textiles, Grasim, Ultratech to name a few. Among others, one could look at Uniphos Enterprises and BF Investments.
Q) A large part of the recovery in 2018 was led by heavyweights and on the other hand, small & mid-caps remain muted. Do you think the broader market is likely to remain under pressure?
A) Broader markets will remain lackluster due to lack of participation. However, we could see specific stocks in action based on news or developments in the specific sector or stock.
Q) 2019 strategy: Top five fundamental safe stocks which are good buys at current levels for a holding period of 1 year?
Q) Which sectors are likely to hog the limelight in 2019?
A) Though I expect FMCG and pharma to do well in 2019, I expect a good recovery in cement and discovery of PSU banks as a sector.
Q) Where do you see the benchmark indices headed in the near term?
A) Global events, as well as impending election results, kept the markets on the edge in the first two weeks of December. The market absorbed the outcome of state election even though BJP failed to get an absolute majority in any of the Hindi heartland states.
Markets generally prefer continuity, except for 2014 when it was waiting for the Modi government to take over. However, it also expects a stable government after an initial period of knee-jerk reaction and volatility, whenever there is an upset for the incumbent government. Thus, I expect the markets to be back on track in 2019, even if there is an upset at Centre.
Q) Do you think the pain in the mid and smallcaps is here to stay in 2019?
A) Well, the small and the midcaps as a group is moving up after a sustainable rally in the largecaps. However, 2018 was different as even among the largecaps, the rally was limited to a few index heavyweights.
The pain the small and midcaps would continue in the initial months of 2019, but I see it as a stock pickers’ delight.
Q) Do you think rupee will continue to appreciate in the near term?
A) I think we have seen the worst for the rupee when it was trading closer to Rs 75/USD. Going forward, I believe INR/USD should stablise around Rs 70/71 and possibly appreciate if we have a stable government in 2019 with incremental foreign flows.
Q) What should be the ideal portfolio allocation for investors for the next one year?
A) One should look to increase exposure to equities since troubled times is a great opportunity to get invested. I would invest 60 percent in equities, of which 10 percent in cash, 30 percent in fixed income, and the rest 10 percent in gold/gold equivalents.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!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .