As the govt focus increases on rural, agri and infrastructure growth could lead to consumption related boom occurring in rural market themes. More importantly, it will be a difficult year for stock picking.
After an explosive rally seen in 2017, the year 2018 will be a volatile one, according to Nilesh Shah, MD, Kotak Mahindra AMC. In an interview with CNBC-TV18 Shah said new highs will be possible in this year only if corporate earnings growth starts to inch up, and once clarity emerges on the 2019 election verdict.
“New highs on the index will require uptrend in corporate results and some clarity on the 2019 election verdict. Barring PSU banks, most of the companies reported earnings in-line with expectations or little ahead of expectations,” he said.
On sectoral trends, a depreciating rupee and large orders could continue to support IT companies. One big reason which could lead to outperformance is low valuation as well as under ownership.
With increased govt focus on rural, agri, and infrastructure growth there could be a consumption-related boom in rural market themes.
But he warns it will be a difficult year for stock picking.
“This is the year where investors need to pick bottom-up stocks than top-down because within sectors the divergence could be reasonable high,” said Shah.
As interest rates start rising in India and abroad there will be some impact on equities. “But, at the end of the day, half-a-percent move from 7.5 to 8 is unlikely to make a material difference unless sentiment is like that 8 will go to 8.5 or 9,” explains Shah.
Another factor influencing debt market is the absence of banks in the secondary market. January 2018 was the first month after a long time when banks became net sellers of government securities than net buyers.“If the largest buyers of government securities become net sellers than yields have no option but to go up. Banks must return to govt securities market,” said Shah.