Lower input costs and sharp improvement in macros with stable rupee and oil correcting over 25-30% to help earnings growth.
A strong, double-digit earnings growth of 18 percent in FY19 should shore up the market going ahead, Sanjiv Bhasin, executive vice-president, markets and corporate affairs at IIFL said in an interview to Moneycontrol's Uttaresh Venkateshwaran.
For the upcoming fiscal, he expects Nifty to trade between 10,000 and 12,000 and by next Diwali, the index could touch 14,000. Edited excerpts:
Q. What is your review on the recently-concluded earnings season? Which were the big surprises and disappointments?
A. The outperformers were metals, private banks, NBFC, energy, consumption and capital goods. Disappointments were mainly from pharmaceuticals, auto, PSU banks and realty.
Q. What is your outlook for the rest of FY19?
A. FY19 should see strong double-digit earnings growth with consensus 18 percent overall growth. This is on the back of lower input costs and a sharp improvement in macros with stable rupee and oil correcting over 25-30 percent.
Also, capex expansion from government should see more traction to which we should also see a strong revival in private capex.
Q. Nifty has traded in a narrow range for the larger part of H1FY19. What is your target on Nifty for rest of this fiscal and for the CY2019?
A. We saw huge volatility as trade wars, rupee plunge and oil spike saw foreign selling escalate. This fiscal will again see state elections adding to the uncertainty.
For this fiscal, we expect Nifty to trade between 10,000 and 12,000. However, for CY2019 we expect earnings growth coupled with election getting over can see India outperform among emerging markets with Nifty hitting 14,000 by next Diwali.
Q. Factors such as oil and rupee have been in favour of D-Street recently. Is this rally likely to continue?
A. Yes, the strong rebound in rupee and sharp fall in oil will see very strong foreign flows. They will buy stocks as India has outperformed in the emerging market basket. This will also be attributed to huge underperformance of the emerging markets in 2018. This also implies the US dollar will see substantial weakness after being the best performer in 2018.
The demographic premium to India's growth story will return as we get past the elections and consumption again picks up with most sectors participating in the recovery and GDP growing to over 8 percent.
Q. What are the sectors for investors to keep an eye on in the near term?
A. Financials, auto, consumer discretionary and staples, power, capital goods and PSU stocks as growth spurs government expenditure.
Q. Could you recommend a few stocks for investors to buy with a one-year or long-term view?
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