I am bullish on Indian equities on a long term horizon. Nifty is already at 11,750 levels and if no major negative news hits market, there is some amount of possibility that it may touch 12,000 before elections, Pradeep Gupta, Co-Founder & Vice Chairman, Anand Rathi said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q: Rising crude oil prices dampened market sentiment a bit recently. Will it touch $80 a barrel and is it a real threat to India as well as equity?
A: I would like to desist from estimating the crude oil prices. At the moment, oil price are going up due to withdrawal of exemption on Iranian oil exports by the US. Medium to long term impact on this issue will depend on how US, Russia and OPEC reacts to this move.
My guess is that this situation is not going to go for a long period of time. If that so, then I believe that implications are not going to very adversely impact Indian capital market scenario on a long term basis. However, if the situation goes for a longer time and increase in oil prices stay for prolong period then it will surely impact the Indian capital markets negatively.
Q: Most analysts saying the Nifty is expected to surpass 12,000 and Sensex 40,000 levels before elections. Do you agree and if yes, then what factors would support that rally?
A: I am bullish on Indian equities on a long term horizon. In the recent times, there are developments on a world economic front (e.g. Chinese manufacturing PMI over 50, positive credit growth in China, strong labour market in US) suggest that growth in second-half of 2019 would be stronger than anticipated. Similarly, inflation is benign, neutral monetary policy, liquidity is comfortable and fiscal policy is accommodative across the world.
Domestically, I feel that economy will start growing and corporate earnings are going to accelerate and grow more than the earlier years. The reform process being implemented in the past four-five years are going to yield some positive results from the second half of this year.
So based on all these parameters, I am bullish on long term which is for atleast next three years. However it is difficult to predict Nifty or Sensex numbers in a short term period, about the expected predictions of surpassing 12,000 Nifty and 40,000 Sensex before elections.
At the moment major sentiment in the market is positive, FII flows are steady, intermittent negative news such as increase in oil prices, low IIP data can impact the sentiments negatively. Nifty is already at 11,750 levels and if no major negative news hits market, there are some amount of possibility that it may touch 12,000 before elections.
Q: What is your advise to investors in current market conditions, especially after frontline as well as broader indices rallied 10 percent?
A: As mentioned earlier, I am bullish on long term horizon and based on that my advice to investors would be to invest and stay invested in equity basis their asset allocation plan prepared by a good advisor and to conduct a review on scheduled basis. Investors can adopt an SIP mode also. Short term reactions should be looked from an opportunity to invest in equity perspective.
Q: What are key themes one must keep in portfolio for double digit return in FY20?
A: Nifty has gained by 41.89 percent in past 4.3 years (absolute returns from January 2015 at 8,284 level to April 2019 at 11,754.70 level). During this period there are few stocks which have rallied enormously. We have seen a level of erosion in medium and small capital stocks. I feel that now onwards this will become broader base.
I advise investors to keep a well spread and diversified portfolio with a great fundamental story based on proper asset allocation plan. I feel global cyclical sector along with domestic interest sensitive sector. Also consumer and infra related sectors should do well in coming years.
Q: FII inflow remained strong in last three months which boosted market sentiment. Do you expect net inflow to be in the range of Rs 1-1.5 lakh crore in FY20?
A: In recent months FII equity inflow is averaging $2.5 billion – which is about Rs 17,000-18,000 crore. This is happening due to positive growth expectations by the country across the world. I feel that if the present trends and sentiments continue, it might exceed range of Rs 1 lakh to 1.5 lakh crore in FY20.
Q: What are key factors to watch out for (positive and negative) in FY20?
A: I would prefer to watch the acceleration on real growth, continuation of low inflation, global liquidity and healthy earning outlook as key positives. The key negative to have a watch out for are high lending rates, funding shortage for smaller companies, increased populism led fiscal slippage (due to elections environment) and slow investment pick up in the manufacturing sector.
Q: Will FY20 be the year for large caps or midcaps?
A: India is still a growing country where most of the companies are in mid and small cap categories. The impact of positive growth will give larger advantage to this sector and hence I believe there is always going to be a better story for mid and small cap (selectively based on fundamentals).
In the recent past, mid-cap stocks have underperformed large caps by a big margin. Moreover, valuations of the mid-cap companies look attractive. So, I think FY20 is the year for mid-cap stocks.
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