The focus will also be on crude oil prices, Mayuresh Joshi of Angel Broking said. The expert was speaking about the much-talked-about OPEC meet
Terming 2018 as a mixed year for the market, Mayuresh Joshi of Angel Broking said the market could move in a range, although the action could be more stock-specific.
“The most important event will be the progression of the trade war. The hope is that the US and China are able to work out an agreement before the three-month truce period expires,” Joshi, Fund Manager at Angel Broking told Moneycontrol’s Uttaresh Venkateshwaran.
The focus will also be on crude oil prices, he added. The expert was speaking about the much-talked-about OPEC meet which may decide on curbing supplies. This could have an impact on oil prices and hike India’s oil import bill. Edited excerpts:
Q: With under a month to go for year-end, how would you rate the market’s performance in 2018?
A: The year 2018 has seen the Nifty and the Sensex give away much of their gains, although the year-end rally is quite interesting.
During the year, the Union Budget decision to impose a tax on LTCG led to a sell-off in midcaps. In the second half, the IL&FS defaults created a sort of liquidity crunch in the financial markets.
However, the GDP is likely to grow at around 7.5 percent for the full year and we have seen some real progress on the NCLT front.
Overall, it has been a mixed year for the market.
Q: What were the big tailwinds and headwinds throughout the year?
A: The major tailwinds were the sharp fall in crude oil prices post-October. The rupee recovering from 75/$ to 70/$ is also a major tailwind and is likely to help reduce input costs substantially. It is also likely to hold inflation at lower levels.
The big headwind appears to be global uncertainty with the trade war likely to slow down growth in the economy. Also, any hawkishness or any liquidity absorption strategy by global central banks would be a key headwind.
Q: Going forward, in 2018, what is the outlook for equity markets? What’s your Sensex and Nifty target?
A: We expect the Nifty and the Sensex to trade in a broad range bound fashion, although the action is likely to be more stock specific.
A lot will depend on the Bank Nifty which has an inordinately high weightage in the indices.
Q: Could you comment on midcaps’ performance in 2018 and the outlook ahead?
A: Midcaps have had a tough time during the calendar year 2018. The tax on LTCG led to a sell-off in midcaps. At the same time, SEBI imposed additional special margins (ASM) on a large number of mid cap and small cap stocks leading to serious curbs on trading activity in these stocks.
But the big macro shocks for midcaps came in the second half. The IL&FS fiasco led to value destruction across NBFCs and that had a trickle-down effect on sectors like realty which relied on NBFCs for funding.
The brent crude touching a high of $86/bbl was also a dampener although that has been partially addressed by the recent correction.
Q: What are the big events that the market will keep an eye on going forward?
A: The most important event will be the progression of the trade war. The hope is that the US and China are able to work out an agreement before the three-month truce period expires.
The focus will also be on crude oil prices. The OPEC meet is likely to take a decision on supply curbs and that will have an impact on oil prices and hike India’s oil import bill.
The next big event to keep an eye on will be the Fed meet outcomes. Fed chair, Jerome Powell, has hinted at a more dovish approach and if that can bring US bond yields lower, the world markets will breathe a sigh of relief. From an Indian perspective, the big story will be political rather than economic.
The four critical elections of MP, Chhattisgarh, Rajasthan and Telangana will set the tone for the much bigger general elections in 2019. The election outcome will have larger implications for the trajectory of economic policy and the reforms process.
Q: What is your view on telecom space? The segment has taken a big beating. How do telecom stocks look with a near- and mid-term perspective?
A: The good news is that the telecom space may have finally seen the process of consolidation being completed during the year. However, telecom companies will continue to remain challenged on two fronts.
Most telecom companies have paid large monies for spectrum during the auctions and that has led to their debt ballooning. That will continue to pose a financial risk. Secondly, the price war triggered by Reliance Jio has pulled ARPUs down to near unsustainable levels.
A lot will predicate on how the ARPUs move in the coming year. While the immediate risks may be in the price, the sector will require a really strong traction for generating superior cash flows.
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