The Nifty50 which rose a little over 7 percent in the first half of 2018 starting from April 1, 2017, to 29 September, many small and midcap stocks rose 100-300 percent in the same period.
Stocks which rose in the first six months of the financial year 2018 include socks like Indiabulls Ventures in the smallcap space led the rally, up 383 percent, followed by Toyam Industries which gained 368 percent, and HEG rose 333 percent.
Other stocks in the smallcap space which rose between 100-330 percent include names like Graphite India, Tinplate Company, Avanti Feeds, Phillips Carbon, Bombay Dyeing, Future Consumer, Geojit Financial Services etc. among others.
In the S&P BSE 500 index, companies which more than doubled investors’ wealth include names like Indiabulls Real Estate, Future Retail, Adani Transmission etc. among others.
After rallying for straight 7-8 months, Indian markets hit a wall of worried in August and September which slowed down the pace. The Nifty50 which hit a record high of 10,178 in September failed to keep the momentum going and plunged over 300 points from the top.
Despite multiple headwinds, fresh highs on the index cannot be ruled out. According to a poll conducted by Moneycontrol last months, most analysts were optimistic about Nifty hitting 10,500-11000 by December end.
Indian market which rose to a fresh record high last month saw some profit booking at higher levels but the rally is not over yet as Nifty is on track to hit 10,500-11,000 and Sensex to 35,000 by December 2017, a Moneycontrol Poll showed of 16 CIOs, HORs, and fund managers.
The fall from the top was fast and furious which got triggered by a myriad of global as well as domestic factors. Apart from higher valuations, uncertainty surrounding geopolitical tensions, depreciating rupee amid a strong dollar, mixed macro cues as well as earnings revival which still remains elusive are certain factors which are weighing on D-Street.
Analysts expect markets to remain in a range for the rest of FY18 as there are multiple headwinds in the forms of rising crude oil price, falling rupee, persistent selling by foreign investors (FPIs) will cap further upside.
But, new record highs cannot be ruled out amid volatility.
“We expect the market to remain volatile and uncertain over the next 3-6 months in wake of the several headwinds that have cropped up over the past couple of months. Amongst these, at the top of investors’ mind currently is the premium valuations of the Indian market based on hopes of earnings recovery,” Hitesh Agrawal, EVP & Head – Retail Research, Religare Securities told Moneycontrol.
“The tepid performance delivered by India Inc. in Q1, bogged down by lingering effects of demonetization and the GST transition, and no major surprises expected from the Q2 earnings season, investors seem to be running out of patience,” he said.
The surge in crude oil price to a 2-year high is also not good for India, which imports a large part of its crude oil requirements. Slide in the INR against the USD to a 6-month low, a deficit monsoon and sustained worries on the geopolitical front are added concerns.
The Bull Run still intact:
There are multiple headwinds which Indian market might have to face in the short term but the bull run argument still remains intact for our markets.
Earnings recovery which was expected from September quarter onwards might take some more time due to lag effect of demonetisation and the implementations of goods & services tax (GST).
“Auto, FMCG, OMCs, Building materials companies and some of the selected Banks etc. may report a good set of numbers this time. The economic growth is expected to improve from the third quarter of the current financial years,” Sanjeev Jain, AVP - Equity Research at Ashika Stock Broking Ltd told Moneycontrol.
“The real impact of GST may start visibly from the December quarter earnings. For long-term perspective we are confident on the Indian equity market because of ongoing structural changes in the economy for sustained growth,” he said.
Last week, Morgan Stanley came out with a report which forecasted a target of 100,000 for the Sensex in the next 10 years and Indian economy to hit $6 trillion mark from current USD 2 trillion in the same period.
Morgan Stanley expects India's stock market could be among the world's best performers in the next ten years, leading to India's market cap rising from ~USD 2 trillion to ~USD 6 trillion.
The global investment bank sees the BSE Sensex crossing the 100,000 mark in the base case scenario and 1,30,000 mark in the bull case scenario, albeit the bulk of the returns are likely to be front-ended in the coming five years.