RBI policy and union budget would be the key events to watch out for in the near future and once the election euphoria subsides, markets would look at global factors like the US-China trade war and resolution of issues facing the economy, Kotak Securities said, adding they expect the Sensex to range between 42,000-43,300 by March 2020. Stock markets have given a thumbs-up to Narendra Modi-led NDA government coming back into power, with indices Nifty-50 and Sensex extending their record-setting spree for a third day in a row Tuesday.
"Markets were looking for stability, continuity and strong leadership rather than a fractured mandate. Strong government at the Centre has raised investors expectations of reforms being carried forward in a more meaningful way," Kamlesh Rao, MD and CEO, Kotak Securities told reporters here Tuesday.
"Immediately we will have to see what they (government) do in the budget," he said.
"We expect Nifty to range between 12,500 and 13,000 by March 2020 (average around 12,750). In bull case, expect Nifty to range between 13,000 and 13,500 by March 2020 (average around 13,250)," Rao added while discussing market outlook post election.
Kotak Securities has set the Sensex target by March 2020 to be between 42,000 and 43,300 (average 42,650).
"Political mandate is fine. I think there are lot of issues lurking around both in India as well as outside which we need to have sight on. US-china trade war is a known story, we think that local macros have slowed down.
"Also, we think at about USD 70 crude does not make a big difference. Around that range its absolutely fine, only moment if it goes beyond that range and remains their for long period of time it will be harmful. FII flows are positive and we think money will come in Indian markets," Rao said.
On expectation from Modi government, the brokerage firm said, "We expect government's focus will be to revive the economic growth and investment although the macro-economic situation is quite challenging. There is a need for strong fiscal stimulus but scope of doing so seems limited given higher fiscal deficit.
"However, there is scope for monetary stimulus in the form of rate cuts, higher FPI limits for government bonds and infusion of liquidity in the banking system."
It further added that government would need to implement further reforms to attract FDI in various sectors. Revival of capex cycle and investment of private sector in infrastructure building will be crucial to achieve the desired GDP growth and job creation.
"Overall, we see the next two quarters as one of stability in the capital markets and policy decisions during this time shaping the trajectory of markets in the future," the company said.
It also highlighted seven focus areas to boost the economy -- infrastructure, rural focus, housing for every family by 2022, attracting FDI in manufacturing to make India a global manufacturing hub, BFSI reforms (fasten IBC resolution process and solve liquidity situation of NBFCs), privatisation and strategic divestment of PSUs and simplify GST system to enhance tax collection.
On mid-cap stock movement, the brokerage firm said, time wise 18 months have gone since the mid and small cap indices have seen correction.
"With NDA coming back into power, we can expect local investors to take comfort in the mid and small-cap space with a longer 2-3 year horizon and inflows could resume in them," Kotak Securities said.
On sectors to watch out for, it said that capital goods, construction, building materials, corporate banks, power equipment, housing finance companies and rural focused companies could benefit the most in the next one year.
It, however, said consumption stocks could take a back seat because of slowdown in demand and rich valuations.
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