Moneycontrol
Last Updated : Nov 09, 2018 11:10 AM IST | Source: Moneycontrol.com

Nifty target for Diwali 2019 at 11,500, like Biocon, Sun Pharma for long term: Edelweiss

Indian markets will be impacted by many impending global factors in the next 1 year. As global trade tiffs are increasingly turning into standoffs, trade and capital flows to and from India would definitely be affected.

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The market is currently facing pressure as medium-term troubles like liquidity, regulatory concerns and crude oil have made market participants to rethink strategy amid higher valuations. We expect Nifty to approach 11,500 by next Diwali once this current downtrend ends and market finds a bottom, Sahil Kapoor, Chief Market Strategist, Edelweiss Investment Research, said in an interview with Moneycontrol’s Kshitij Anand.

Edited excerpts:

What is your assessment of the market at current level? What is your target for Sensex and Nifty till next Diwali and why?

The market is currently facing pressure as medium-term troubles like liquidity, regulatory concerns and crude oil have caused market participants to rethink amid higher valuations.

We expect Nifty to approach 11,500 by next Diwali once this current downtrend ends and market finds a bottom.

Do you think the selling pressure will continue in the broader market till next Diwali or is it the right time to catch the falling knife but selectively?

The headline large-cap indices are still being held up by a few big stocks, however, the market breadth remains weak and the broader markets have seen continued selling pressure.

Small and midcaps usually lead the reaction to down cycles, and as the market sentiments turn sour they are the first ones to decline.

In our opinion, the broader market is already pretty overvalued relative to the large-cap indices and the latest market rout is an opportunity for such indices to come back to better valuations and such corrections would most probably end once the short-term liquidity and financing concerns are settled in a few months.

What are the major factors which will impact markets till next Diwali?

Indian markets will be impacted by many impending global factors in the next 1 year. As global trade tiffs are increasingly turning into standoffs, trade and capital flows to and from India would definitely be affected.

The US economy is increasingly running into the overheated territory and the direction and magnitude of their monetary policy should be closely watched by Indian market participants.

European Union would see increased uncertainty from Brexit negotiations next year. Domestically, uncertain government dynamics due to the general elections would be a major determinant of market moves.

Top five stocks which investors could buy with an investment horizon of 2-3 years?

1. Biocon
2. Dabur India
3. HDFC Bank 
4. Havells India

5. Sun Pharmaceutical Industries

What is your advice to investors considering the fact that every trick in the book seems to have failed to protect portfolio destruction?

It has been observed in previous market cycles that buying into Nifty at the peak gives an average 3-year CAGR return of just 2-3 percent while buying into it at the bottom gives a steep average 3-year CAGR return of 21 percent.

This goes to show that investors should sit tight as these round of corrections run their course while earnings make a recovery. Buying anywhere close to the bottom territory should more than make up for the portfolio destruction faced until now.

How are you reading September quarter results from India Inc. up till now?

Banks and financial sector companies have largely reported strong results with encouraging performance from HDFC, Bajaj Finance and ICICI Bank. Also, IT are also having a good quarter with a boost to earnings from international operations as rupee depreciates.

However, the overall earnings growth trajectory is still subdued and needs at least another quarter of strong performance to validate an earnings revival.

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.
First Published on Nov 8, 2018 11:16 am
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