We don't see record highs, being very cautious but we do see Nifty retesting its previous all-time highs of around 12100 and then we would have to measure the breadth as well.
The government measures and projects along with RBI's rate cut are expected to push demand in Q3 and Q4 and we may also see some improvement in numbers going forward, Mustafa Nadeem, CEO Epic Research, said in an interview with Moneycontrol’s Sunil Matkar.
Q: Global, as well as, domestic cues started favouring the bulls and the market ended at a three-month closing high. Does it mean the market has priced in most of the negative news and started making the real northward journey? Will, it hit record highs by December 2019?
A. We saw one of the worst quarter in terms of auto sales, GDP growth and, Index of industrial production (IIP) and manufacturing numbers were also muted. Hence, we probably have digested if there was anything on the table labelled as negative data.
Also, at the same time, global headwinds such as the US-China trade tussle has also petered out and the RBI, with regular rate cuts, is also actively working towards improving the economic scenerio.
The Nifty is in its northward journey but we are basically in a rangebound scenario with the broader range being 12,000 to 10,000. So we don't see it reaching record highs being very cautious that is. But we do see Nifty retesting its previous all-time highs of around 12,100 and then we would have to measure the breadth as well. Beyond that, we may see 12,400/700 as next target.
Q: FIIs seem to have resumed buying in India as they were net buyers throughout the previous week. Does it mean the new bull run has begun?
A. It would be too early to say that we have resumed in a completely new bull run as it is very concentrated at this point of time. FII's have returned but it would be too early to establish the fact that the bull run has started. Largely FII has been net negative on the month on month basis. Also, the global environment has eased but the wrinkles are still there.
Q: Do you think the midcaps and smallcap will outperform large caps in 2020, after two-year of underperformance? What are your thoughts?
A. We believe midcap and smallcap have seen the worst in the last few years given their underperformance. There is some buying coming as both indices are showing very strong support at current levels but it is stock-specific at this moment.
The smallcap and midcap space tends to outperform the broader index in the long run so in 2020 or beyond we may see outperformance and the time is ripe to invest in this space.
Q: What are your top five picks for the next one year which could give double-digit return?
A. We are bullish on consumer staples, given its growth trajectory and with recent rate cuts and reduction in corporate tax, we may see improved numbers. The growth which was deteriorating may pick up in easing monetary environment in coming quarters and further the festive season should add to that growth.
We are also bullish on Escorts that is into Agri machinery, equipment and also foraying in railway equipment. The company has seen a hit due to slowdown in Agri space and has seen lower numbers in its recent quarterly results but the company is trying to maintain its growth rate of the last couple of years with its growth in international markets. Its exports have trebled recently while with lowered rates and demand picking up in coming quarters we expect its domestic operations to improve. We are upbeat on Escorts for a target of Rs 760.
Q: Considering the market behaviour, do you think the government will announce more new measures or RBI will cut the repo rate further in the coming months? What is market pricing in currently?
A. The market is pricing in the stance of RBI which is at the moment very accommodative. RBI may further use its tools to boost the liquidity or there could be a rate cut on the horizon. So we may not be surprised by another cut nor the market will be.
Secondly, the market is pricing in the festive season and the demand that we may see picking up and further some improvement in Q3 and Q4 of FY20. The earnings season is on its way so we are also seeing strength coming to quality stocks and outperformers continue to extend their run. The government measures and projects along with RBI's rate cut is expected to push demand in Q3 and Q4 and we may see some improvement in numbers going forward.Disclaimer: The views and investment tips expressed by investment experts 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.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.