Experts expect the market to inch higher further on hopes of tax sops in the Union Budget despite expectations of weak quarterly earnings due to demonetisation and expected announcement of US policies by the US president-elect Donald Trump.
Benchmark indices staged smart come back in the week gone by, recouping previous week's losses on hopes of tax sops in the Union Budget and positive developments in PM's speech especially after the end of 50 days since the announcement of demonetisation. FMCG, IT and banks stocks helped the Nifty gain 2.5 percent at 8185.80 during the week.
The recovery after sell-off amid consolidation and low volumes indicated that the market may have found bottom for the time being or at least till the Union Budget, experts feel.
They expect the market to inch higher further on hopes of tax sops in the Union Budget despite expectations of weak quarterly earnings due to demonetisation and expected announcement of US policies by the US president-elect Donald Trump.
Even the year 2017 is likely to be positive for the market with analysts expecting double digit returns, especially after a 3 percent rally that took place in 2016 despite unexpected events such as Brexit, Donald Trump's win, demonetisation and OPEC & non-OPEC countries' agreement for oil production cut.
Dilip Bhat of Prabhudas Lilladher says he expects some kind of a pre-Budget rally. This rally will largely pin its hopes on PM assuaging sentiments in terms of taxes, he feels.
From the Rs 15 lakh crore money that has come back into the banking system after the note ban, some of it will percolate into the market; and it will provide a tailwind, Bhat says.
Jan Dehn of Ashmore, who finds Indian markets attractive, both from an equity and fixed income perspective, says though the execution of demonetisation hasn't been as smooth as expected, this is a temporary aberration. The Indian economy will come out of it without any lasting damage and come out in a stronger place; the underlying fundamentals will remain solid, he believes.
He feels FIIs, who have been net sellers in December quarter, will make a comeback. Time will show that neither Donald Trump nor demonetisation will have adverse fundamental implications for India. Investors must view underperformance as an opportunity to add to exposures, he says.
FIIs will be back into the market after their Christmas holiday. They net sold Rs 31,128.61 crore worth of equities in October-December quarter, especially after demonetisation, US elections & Federal Reserve's hawkish commentary. In 2016, FIIs bought only Rs 18,195.73 crore worth of shares while DIIs were quite supportive, making Rs 35,362.56 crore worth of buying.
In 2016, the NSE benchmark surged 3 percent, underperforming the Midcap that gained 8 percent. The Metal index was the biggest gainer, up 45 percent followed by Bank (up 7.4 percent) and Auto (up 11 percent) whereas IT lost 7 percent and Pharma shed 14 percent.
In the coming week, the market on Monday will first react to PM's speech and auto sales data.
Prime Minister Narendra Modi will address the nation today evening (December 31). Key points that are likely to be watched in the speech - the impact of demonetisation, tax sops and UP elections.
Auto companies (Maruti Suzuki, Tata Motors, Mahindra & Mahindra, Bajaj Auto, Hero Motocorp, Eicher Motors, TVS Motor and Ashok Leyland) will announce December sales data on January 1. The full impact of demonetisation is likely to be seen.
In corporate action, JSW Steel will start trading ex-split from January 4. Jagran Prakashan and Apar Industries will have board meeting to consider the buyback of shares on January 5 & 6, respectively. NBCC will consider bonus issue on January 4.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.