As we step in the Modi 2.0 period, a lot will depend upon how much of India's economic growth will translate into earnings growth for the corporates.
For fresh investors, starting with SIP in Nifty 50 and Nifty Next 50 is ideal. On the way, they have to learn about evaluating stocks and their valuations, Deepak Jasani, Head Retail Research, HDFC Securities, said in an interview with Moneycontrol’s Kshitij Anand.
Q) Do you think we are heading for new highs in 2019 post-election results?
A) As we step in the Modi 2.0 period, a lot will depend upon how much of India's economic growth will translate into earnings growth for the corporates. Corporate earnings have to pick up pace after remaining lacklustre over the past 4 years.
For this cleansing of NPAs, legal reforms, a normal monsoon, liquidity availability and faster resolution under IBC are required.
A normally growing global economy will also help. Despite all these favourable factors, the frontline indices may find it difficult to record more than low double-digit returns on a point to point basis over the next one year though in the interim we may see a sharp dip and also higher levels (including making a new high).
Q) What sectors should one bet on after the election outcome?
A) Cyclicals could be back in favour as they are the recipient of public spend benefits. Apart from cyclical, cement, PSU stocks including banks, capital goods and realty could also remain in favour. We also like consumption, but investors should wait for better cues from monsoon and rural income revival.
Q) Should investors look at select mid & smallcaps for the next 5 years?
A) The Nifty MidCap gauge’s valuation is near the cheapest since 2012 relative to the main NSE Nifty50 index despite the recent rise.
Midcaps have done well in the last 1 year following the elections by a factor of 2 compared to largecaps. However, looking at the index in midcaps is a bit misleading as a few large loss-making companies in the index have pulled down the earnings resulting in the index looking expensive.
While the excesses in mid and smallcap valuations have corrected to a great extent over the last one-and-half year, we believe that only select few companies within the category could do well on a sustainable basis from the next two to three years perspective based on earnings growth potential.
It is best to be selective rather than get unduly excited about the midcap rally. Investors should not confuse a discount for an attractive buying opportunity which may prove to be a costly mistake.
Investors have become more choosy about the governance and capital allocation decisions made by the companies’ management. Many small-cap and mid-cap companies may fail the test of survival in an era of constant disruption – be it owing to regulations or technology.
Retail investors should learn from market moves, and may also want to upgrade themselves regarding the ways of the markets, and individual stocks financials/valuations.
Q) What advice would you give to new investors with a five-year outlook as the new government takes the centre?
A) For fresh investors, starting with SIP in Nifty 50 and Nifty Next 50 is ideal. On the way, they have to learn about evaluating stocks and their valuations. Once they are reasonably confident about these, they can start doing direct equity as well.Disclaimer: The views and investment tips expressed by investment expert 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.The Great Diwali Discount!
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