Sensex likely to top 45K by Diwali 2019; ICICI Bank, Maruti among Karvy's Muhurat picks

By Kshitij Anand

Kshitij Anand Moneycontrol News

At an aggregate level, we believe that largecaps offer a better risk-return profile, however, some individual stock names among small and midcaps look better, Vivek Ranjan Misra, Head of Fundamental Research at Karvy Stock Broking, said in an interview with Moneycontrol’s Kshitij Anand.

Q. What is your target for Sensex and Nifty till next Diwali and why?

A. Our Sensex target for 2019 end is 45,000.

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

A. At an aggregate level, we believe that largecaps offer a better risk-return profile, however, some individual stock names among small and midcaps look better. Investors should stick to quality.

I think investors are well off doing staggered buying as more volatility is expected in the near term before elections.

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

A. Elections: The outcome of the upcoming state elections will set the tone for expectations for 2019 parliamentary elections.

As things unfold gradually in the run-up to the elections in terms of the alliances, PM candidate and so on that should create volatility in the markets. The final outcome, however, will be a make or break for the markets.

Policy action and liquidity crunch: The US Federal Reserve is likely to raise rates one more time in 2018 and three times in 2019. We also expect RBI to raise rates by 50 bps over the next twelve months. This coupled with the ongoing liquidity crunch will make RBI’s job difficult to strike a balance.

Geopolitical and trade tensions: In the wake of ongoing trade tensions, while any drastic decision, which is detrimental to the global economy is not to be expected, uncertainty can prevail as these tensions are dragged in the future.

The continuous news flow, since markets don’t like uncertainty, will create volatility which is not good for the markets.

Q. Top five stocks which investors could buy on the Muhurat Trading of 2018 with an investment horizon of 2-3 years?

A) Take Solutions, Bajaj Electricals, Sandhar Technologies, ICICI Bank, and Maruti Suzuki India.

Q. Which sectors are likely to remain in focus till next Diwali?

A. IT is likely to perform well and we expect autos, capital goods and banks to also perform well. Q. What should be the ideal portfolio construction methodology for investors for Diwali 2019? (Age of investors is 35-40 years)

A) Equities – 40 percent
Debt – 30 percent - Mostly G Secs
Gold – 10 percent
Cash – 20 percent

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

A. We believe that investors should get used to higher volatility, and stick to quality names. Thy should rely on staggered buying or resort to SIPs and don’t stop them when markets are falling – that is the time to buy.

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

A. It has been a mixed bag. Of the Nifty companies which declared earnings so far, 26 percent missed consensus earnings estimates, while 41 percent are in line.

The Nifty earnings growth of 7 percent YoY is not strong, revenues grew by just 9 percent and EBITDA was up by 13 percent which is a bit low.

On the positive side, the EBITDA margin of 19.4 percent is above estimates and up on a YoY basis. This is because many companies are expected to have focused on cost control measures.

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