Sensex may head toward 38,000 and Nifty could hit Mount 11K by next Diwali: Kotak Sec

Sensex_Nifty

The economy has started witnessing uptick as seen from the latest service sector activity, auto sales numbers, as well as bid pipeline for government projects, Teena Virmani, Vice President-PCG Research at Kotak Securities, said in an exclusive interview with Kshitij Anand of Moneycontrol.

A) Higher valuations and weak near-term earnings growth may moderate the returns in Samvat 2074, in comparison with last year.

However, with financialisation of savings, government reforms, formalszation of economy post GST implementation, rural demand revival as well as lower interest rates, we expect equity as an asset class to continue outperforming other asset classes.

A) There are near-term concerns over earnings and macros along with continued tensions between the US and North Korea.

But, the economy has started witnessing uptick as witnessed from the latest service sector activity, auto sales numbers as well as bid pipeline for government projects.

Our technical team has given a target of 11,850 for Nifty and around 37,000-38,000 for Sensex.

A) The trend is likely to continue for Samvat 2074 as well, as the sentiment in IPOs is led by attractive business model, scalability of business and expected returns along with sustained inflows from domestic institutional investors.

Going ahead we may continue to see IPOs in the insurance, hotel and hospitality, textile, logistics space based on the filings of 16-17 companies with SEBI.

A) In the current scenario, investors should focus on bottom-up approach, favoring sectors which could be positively impacted by improvement in consumption, implementation of GST and government spending, keeping into account the right valuations.

Keep accumulating stocks in these sectors where valuations provide a comfort and book profits where valuations don’t justify further upsides.

A) We expect earnings to get impacted during Q2FY18 due to GST led disruption, monsoon as well as other seasonal factors. Recovery in earnings is largely expected to come from H2FY18 or FY19.

A) We believe that infrastructure and allied sectors are likely to lead the next leg of the rally. With strong bidding expected in the road, urban infra, building, and irrigation segment, we expect infrastructure and correspondingly allied sectors such as cement, steel, capital goods to benefit from the same.

Along with this, consumption-driven sectors would continue to benefit going forward also but one would have to adopt a bottom-up approach for the same.

A) It is very difficult to find out an under-owned stock in the current market but with a 3-5 years view, we like Shankara Building Products, Engineers India, Vedanta, Fiem Industries and VIP industries.

A) The flow of domestic money into equity markets is actually a result of financialisation of savings post demonetization. We expect this trend to continue going forward also.

No matter that equity investments always carry a risk, but with a longer-term investment horizon, equity as an asset class has largely outperformed other asset classes.

A) Investors should have a habit of systematically investing into equities – be it stocks or mutual funds and have a long-term investment horizon.