2020 will be much better than last 5 years in terms of number of companies and size of IPOs.
Metal stocks such as Vedanta, Hindustan Zinc, JSW Steel are expected to witness good strength as their cycle has bottomed out. The cyclical uptrend has begun internationally as well, and a boost in consumption will be an added advantage for these stocks, said Umesh Mehta, Head of Research, Samco Securities in an interview to Moneycontrol's Sunil Shankar Matkar.
Q. The Sensex rallied more than 15 percent in 2019 and also hit historic highs thanks to domestic as well as global cues. Will the same trend be repeated in 2020, and what would be the main drivers for the same?
A. A 12-15 percent rally is expected in 2020 as well. However, the returns might be skewed as not all months would provide equal returns. Some months might exceed expectations, and others might experience corrections or a mean reversion. But in the end, a rally is expected by the bourses next year.
A few important drivers would be the easing of the credit environment, resolution concerning the IL&FS case, the government’s disinvestment plan, the scrappage policy and major IPOs.
Q. Most experts believe the broader markets (midcap and smallcap) to gain strength and will outperform the frontliners in 2020. What are your thoughts, and do you agree with them?
A. Yes, certainly once the risk appetite returns, the broader markets will start to gain momentum. Mid and smallcaps have faced a lot of heat in the past year, and they are expected to revive the coming year as expectations are rife for the economic engine to start rolling. The economic revival will eventually bring back profitability to small and midcaps, which currently are elusive.
Q. What are key challenges/risks (global as well as domestic) for the market in the coming year?
A. The key risks for the stock market in 2020 would be inflation, dollar strengthening, buoyancy in GST collection, large IPOs, the sucking away of liquidity from the secondary markets, capex revival in spite of tax reduction from domestic corporates, and fresh investments from foreign giants to take advantage of the 15 percent corporate tax.
Q. More than 35 stocks rallied more than 50 percent in 2019, including most of the well-known names. What are those top five stocks which you feel could return more than 50 percent in 2020?
A. The year 2020 could see a rally in metals and housing finance companies. Metal stocks such as Vedanta, Hindustan Zinc, JSW Steel are expected to show good strength as their cycle has bottomed out. The cyclical uptrend has begun internationally as well, and a boost in consumption will be an added advantage for these stocks. At the same time, the mid housing finance category, which had experienced liquidity squeeze this year, will start showing momentum once money starts flowing into the system.
Q. The primary market saw less IPOs in 2019 than 2018, and half of them gave double-digit returns. What are your thoughts on the primary market for 2020: do you see more IPOs in 2020 than 2019, and which IPOs are expected in the coming year?
A. The year 2020 will be much better than last five years in terms of the number of companies and the size of the IPOs. India is capital hungry, and a good way to raise long term capital is through equities. HDB Financial, SBI Cards, and Burger King would be a few IPOs that are expected to gain limelight in 2020.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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.