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Last Updated : Nov 10, 2019 07:35 AM IST | Source: Moneycontrol.com

'Post record high on Sensex, market likely to consolidate in coming week'

India Inc. has put up a dismal show on an absolute basis (barring banks) considering the slowdown witnessed across sectors. However, if we compare the expectations, earnings have fared relatively better

After this sharp up move, indications are in favour of a consolidation of the index with marginal profit-taking in between, and we expect the Nifty50 to trade within 11,700-12,100 zone, Ajit Mishra, VP - Research, Religare Broking, said in an interview with Moneycontrol’s Kshitij Anand.

Q: Fresh record highs for the Sensex while Nifty50 had a touch and go moment with 12,000 in the week gone by. Do you think Moody’s outlook change on Indian will impact sentiment?

The Indian market has seen a decent rally in the recent past led by both positive developments between the US-China trade war and renewed domestic sentiments driven by big bang measures by the government to revive the economy.

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While the announcements made by the government have been positive, it could take a while for it to yield the desired results.

Therefore, given the recent run-up and Moody’s negative outlook on India could impact sentiments in the near term.

Nonetheless, we remain cautiously optimistic in the medium term led by positive global markets and the government’s increased focus on reviving the economy.

Q: Will Nifty50 be able to touch fresh highs in November given the fact it has crucial resistance placed near 12,000-12,100?

The Nifty50 index has gained exceptionally well in the last five weeks as it rose from roughly 11,100 to 12,000 mark with some intermediate consolidation.

After this sharp up-move, indications are in favour of a consolidation of the index with marginal profit-taking in between. We expect the Nifty50 to trade within 11,700-12,100 zone.

Q: Data suggests that more than 50 percent of the companies are trading at a discount to historical averages. Investors are looking for companies that are trading at a relatively cheaper valuation. Can they look at buying stocks which are trading at a discount or is it better to stay with companies that are attracting momentum?

We believe investors prefer investing in stocks that would restrict the erosion of capital in a bear/volatile market and are relatively safe players.

Companies such as Titan, Maruti, Britannia, Asian Paints, HUL and Nestle are consistent performers as well as the market leader in their respective industries, which helps them in trading at a premium valuation.

Also, these stocks would continue to trade at premium valuation given strong promoter track record, strong corporate governance, and stable long term growth prospects. So, we believe investors should stick to such stocks and average these stocks on dips.

On the other hand, a list of companies that are trading at discount to their historical averages have posted a muted performance due to weak demand and slow production.

Further, they are facing a slowdown in their respective industry and recovery would take some more time. All these factors have led to muted financial performance for companies such as Tata Steel, Coal India, and NTPC.

Apart from this, Bharti Infratel is facing pricing issues, while for Zee, high promoter pledged holdings and the impending deal for stake sale is dragging the stock down.

In the case of ONCG, the deal with HPCL hasn’t been lucrative and fluctuating crude prices brought the stock price under pressure. Further, it would be prudent to invest in the stocks having sound long-term growth prospects and healthy corporate governance.

Q: We are in the last leg of the September quarter earnings. How is the journey so far for India Inc, and will the last leg will see more surprises on the downside?

India Inc has displayed a dismal show on an absolute basis (barring banks) considering the slowdown witnessed across sectors. However, if we compare to the expectations, the earnings have fared relatively better.

This has been largely due to improved margin profile and higher than expected corporate tax benefit (in some cases). On the other hand, banking stocks have performed well with healthy loan growth, and more importantly, an improved asset quality.

Going forward, we expect the same trend to continue for the last leg. However, we believe that the management's outlook would hold importance for market participants.

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.

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First Published on Nov 10, 2019 07:35 am
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