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Last Updated : Jul 06, 2020 09:55 AM IST | Source: Moneycontrol.com

Moneycontrol Readers Survey: Nifty to remain in a range of 10,000-11,000; mid & smallcaps may outperform

On Facebook, 58 percent of respondents believe the Nifty to remain in a range of 10,000-11,000 while on Twitter, 59 percent concurs with this and on Linkedin, 55 percent has the same view on Nifty.

The first half of the calendar year 2020 had been volatile for the Indian equity market and the benchmark Nifty is expected to trade in the range of 10,000-11,000, as per a readers' poll, conducted by Moneycontrol.

The majority of participants of the poll, which was conducted on several social media platforms, said that Nifty will be in the said range, while some believe that the market benchmark hit 12,000-mark in the coming months of the year.

On Facebook, 58 percent of respondents said the Nifty will remain in a range of 10,000-11,000. On Twitter, 59 percent of respondents and 55 percent on LinkedIn share the same view on Nifty.

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Nifty range

Some experts also share the same view.

Rusmik Oza, Executive Vice President & Head of Fundamental Research at Kotak Securities believes the economy should bottom out in Q2 FY21 and go back to normal levels from Q3 FY21 onwards.

He said the Nifty50 is trading at 21 times on a one-year forward basis which is higher than peak valuations. Hence, the next six months will be challenging with more of a downside bias.

"The market should brace for a very rude Q1 FY21 result season as this is the first time when earnings will build in near-zero activity for 2 out of the 3 months. The one year forward EPS of Nfity50 by the end of this calendar year should work to nearly Rs 575. If we apply about 17-18 times valuation to this earnings we get Nifty's level of nearly 10,000 by the end of this calendar year," said Oza.

If the rally gets extended due to further rally in global markets, then it can at best go to nearly 10,900-11,000 but it may not sustain there for long. On the downside we cannot rule out 10-15 percent correction in Nifty if Q1 results disappoint majorly," said Oza.

Mid & smallcaps likely to outperform

BSE Sensex and Nifty shed 15 percent each in the first half of the year 2020, compared to 13 percent fall seen in the S&P BSE Midcap index, and A 10 percent decline seen in the S&P BSE Smallcap index.

In a separate survey, a majority of respondents believe broader markets will continue to outperform the benchmarks.

On Twitter, 62.4 percent of respondents believe mid and smallcaps will continue to outperform the benchmarks, while 60 percent of respondents on Facebook and Linkedin believe the same.

Vinod Nair, Head of Research at Geojit Financial Services is of the view that the outperformance of mid and smallcaps will be challenged, especially in the current quarter of the year 2020, because a large section of the rally was in the second quarter of the year due to the expectation of re-opening of the economy after the deep fall in the equities in February and March, leading to cheap prices and valuation.

"The phase-2 unlock plan will provide better improvement in business on a quarter to quarter basis. But a full recovery is a long road ahead, which does not support a V-shape recovery in the market. A short-term consolidation will be in the interest of the long cycle which looks possible," Nair said.

"The second wave of the virus has started in the US, impacting the equity market due to slowdown in the economic recovery. FIIs inflows in India could also be impacted due to risk-off strategy to shift to safe assets like US treasury and private debt which is guaranteed by the US Fed," said Nair.

The biggest trigger for the market will be a vaccine for COVID-19, say experts. If it arrives soon, the market will rally and the mid and smallcaps will also witness traction. However, if the vaccine gets delayed, the market may see consolidation in the coming months.

The momentum in the Nifty50 is likely to continue and could well take the index towards 10,900 levels in July, but money-making opportunities are available in the small and midcaps space that could outperform in the second half of 2020, Dharmesh Shah, Head – Technical, ICICI direct said in a podcast ‘D-Street Talk’ with Moneycontrol.

The Nifty Midcap and Nifty Smallcap indices have undergone significant price correction of over 50 percent each since 2018 high while time-wise, the current decline has consumed 26 months (no bear market in two decades lasted for more than 19 months -CY2000-2001).

This significant price and time correction has helped indices to work out of the excesses built-in the bull market of 2014-2017 and most negatives now seem priced in, offering favourable risk-reward setup, said Shah.

Ace investor Rakesh Jhunjhunwala, in an interview with CNBC-TV18, said that every bull market starts with an event that shatters everybody so much that everybody keeps promising that he will never buy stocks again and then the first rise never has faith.

"So technically, we are surely in what is going to be a long bull market and then sometimes the market can mislead you, but that is very rare," he said.

"Maybe COVID-19 is not going to be as severe as people think, maybe there are going to a lot of reforms. The reduction in interest rates is a reality, corporate India is getting extremely efficient. We have cleansed corporate India, if this efficient corporate India meets increased volumes then the earnings could go through the roof," said Jhunjhunwala.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
First Published on Jul 6, 2020 09:55 am
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