Since markets are trading near the record high, some consolidation cannot be ruled out in the benchmark indices in the near term.
Broadly, we are eyeing 12,300 in Nifty and in case of any decline 11,800-11,900 zone would act as a cushion, Ajit Mishra, VP – Research, Religare Broking, said in an interview with Moneycontrol’s Kshitij Anand.edited excerpts:
Q) It was a historic week for Indian markets as the Nifty50 and the Sensex both touched fresh record highs, closing the week with gains of over 1 percent each. Do you think the momentum will continue in the coming week?
A) The coming week is an eventful one as participants will first react to the GDP numbers, which came in line with the expectation. Besides, the outcome of Reserve Bank of India’s (RBI’s) monetary policy is scheduled on December 5 and the majority expect a further cut in the interest rate, however, their commentary on future rates would be closely watched.
On the global front, the US-China trade talks will remain in focus. Broadly, we’re eyeing 12,300 in Nifty and in case of any decline 11,800-11,900 zone would act as a cushion.
Q) Do you think the GDP numbers will derail the bull market?
A) The expectation for Q2 GDP was around 4.5-4.7% and it came in line with the street estimates. However, any downward revision of future GDP estimates will be taken negatively by the markets.Initially, we might see a dip but the bias would remain on the positive side, considering the overall buoyancy. Needless to say, markets may also wait for the outcome of RBI monetary policy which could address the growth concerns through a further rate cut.Q) The broader market outperformed frontliners in the week gone by. Do you think that the smart money has now started chasing beaten down small & midcaps?
A) Last week, the broader markets showed signs of improvement and gained about 1-2 percent. Since markets are trading near the record high, some consolidation cannot be ruled out in the benchmark indices in the near term.
Currently, the focus is largely on the index heavyweights but we’re seeing select pockets from the broader front also attracting buying interest.
Further, many stocks have shown signs of improvement in its financials in Q2FY20 earnings and provide valuation comfort as compared to its large-cap peers.
Hence, investors having a horizon of more than 2-3 years can start investing in quality mid and smallcaps with a good promoter track record, low leverage, as well as, healthy growth prospects.
Going ahead, earnings revival and growth forecasts could further accelerate the broader market. However, one should strictly avoid stocks, which have run into trouble owing to mounting debt, promoters’ pledge or other company-specific issues.Q) What should be the investment strategy for December especially at a time when markets are trading near record highs?
A) We have mixed signals at present as the markets are hovering near to peak levels but economic growth data indicates a slowdown.
In such a scenario, it’s prudent to remain cautious and stick largely with quality companies, having sound fundamentals and strong corporate governance. Also, we advise making gradual investments and keeping a balanced portfolio.
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