In the coming week, investors’ focus would be on earnings season, the outcome of Legislative Assembly elections in Haryana and Maharashtra, and trade deal
We believe positive commentary on revival in earnings (in H2FY20) would improve confidence of both FPI and DII in the Indian markets. In addition, the outcome of Legislative Assembly elections in Haryana and Maharashtra, is likely to induce some volatility in the domestic market, Ajit Mishra Vice President, Research, Religare Broking Ltd, said in an interview with Moneycontrol’s Kshitij Anand.Edited excerpts:
Q) Market recorded healthy gains of over 3 percent and closed above its crucial level of 11,600 for the week ended October 18. What are the important levels to track for the Diwali week?
A) The Nifty50 looks buoyant for further up move after the recent surge but 11,800 would be tough to cross in the coming week.
In the case of profit-taking, 11,540-11,370 zone would provide the needed support. We suggest keeping a close watch on the banking index for cues.
A) In the last few days, the markets have witnessed decent FII and DII net inflows indicating a revival in sentiments. Further, given the earnings season, the management outlook for the next few quarters and global cues would dictate near term trend.
Therefore, we expect market sentiment to be buoyant, provided Nifty heavyweights give satisfactory results and reflect a healthy future outlook.
As far as underperformance of the banking sector is concerned, correction in the banking index was triggered by a crisis in PMC Bank and continued selling pressure in few banks due to asset quality concerns.
However, the transmission of low-interest costs to borrowers and uptick in demand could lead to a revival in credit growth. Further, banks and NBFCs are likely to be key beneficiaries of a corporate tax rate cut and this may reflect in their earnings going forward.
Moreover, liquidity infusion through RBI’s surplus transfer, recapitalization of PSU banks and mega amalgamation of PSU banks are the other key factors that should spur banking sector growth in the long term.
Hence, correction in banks with high asset quality and strong corporate governance can be a buying opportunity.Q) Any global or domestic events to track in the coming week which could impact markets?
A) In the coming week, investors’ focus would be on the on-going corporate earnings season, as management commentary (particularly consumption-driven companies) on future outlook would be crucial.
We believe positive commentary on revival in earnings (in H2FY20) would improve the confidence of both FPI and DII in the Indian markets. In addition, the State legislative Assembly Elections outcome (Haryana and Maharashtra) is likely to induce some volatility in the domestic market.
Further on the global front, trade deal between US-China and development on the Brexit front would be on investors’ radar.Q) What is your outlook on markets for Samvat 2077 on markets?
A) We expect the first half of Samvat 2077 will be an important period for the markets as all eyes will be on the demand revival during the festive season, following the government and RBI measures.
We will also be seeing an impact of corporate tax cuts on earnings. Moreover, higher earnings could assuage valuation concerns for the benchmark indices.
Further, the impact of the low-interest cost will be visible in terms of credit growth, consumption revival; etc. On the other hand, the government has a tough task of maintaining fiscal deficit target for FY20 due to revenue loss owing to the corporate tax cut.
Nonetheless, the government’s divestment plans and timely economic revival could help maintain the fiscal balance. We believe Samvat 2077 can be an exciting phase for the markets, provided the global scenario too remain supportive.Q) Dhanteras is on Friday -- Is it the right time to invest in physical Gold or Gold MF?
A) Gold has witnessed a strong run with healthy returns in the past one year. This has been largely due to rising concerns of global economic slowdown, trade tensions between US-China and falling bond yields.
All this has led to investors moving a portion of their capital from risky assets to a safe haven like gold. In India, depreciation in the Indian Rupee has also contributed to the increase in gold prices, which touched a lifetime high recently.
Investment in gold should be looked for safety and stability rather than yielding strong returns. From a portfolio building perspective, Gold should form 5-10 percent of the overall investment portfolio. The investment proportion could be higher (10-15 percent) if the investor wants to build a conservative portfolio.
Further, in between physical gold and gold MF, we would prefer to invest via gold MF as it offers a number of advantages like highly liquid, no problem of adulteration or impurities, lower maintenance cost, brokerage cost is lower at around 0.5-1 percent.Disclaimer: The views and investment tips expressed by investment experts 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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.