Sumit Bilgaiyan of Equity99 said the FIIs made a net inflow only during January and March while DIIs have poured in money for the entire year
If the outcome of the elections is as per the expectations of the market players, we expect a bull run after elections otherwise we believe that market may see another 10-15 percent correction which shall recover towards the end of Samvat 2075, Sumit Bilgaiyan, Founder of Equity99 said in an interview to Moneycontrol's Sunil Shankar Matkar.
Q. How do you see Samvat 2075?
A. In Samvat 2074, Nifty has provided approximately 4 percent return YoY. The Nifty saw a steep correction from its peak of 11,760 owing to
ii) rising oil prices
iii) increased stability in the US market coupled with Fed rate hikes and trade war concerns
iv) liquidity crisis in the NBFC segment.
In Samvat 2075, the Nifty's performance primarily hinges upon the outcome of upcoming four state elections and the general elections. We expect the crude to stabilise in the range of $72-75 per barrel and USD-INR is expected to stabilise around 71-72/dollar which shouldn't be a reason to worry for the economy.
If the outcome of the elections is as per the expectations of the market players we expect a bull run after elections otherwise we believe that a market may see another 10-15 percent correction which shall recover towards the end of Samvat 2075.Q. What are the key sectors to look at for a strong performance and
portfolio in the next one year?A. The key sectors to look forward to shall be
i) NBFCs and HFCs (as these stocks have seen sharp correction and we expect the Partial Credit Enhancement extended by RBI shall help them to recover from the existing systemic level liquidity crunch and deliver good performance in the coming quarters)
ii) Banking – Private sector banks (existing liquidity crisis have put NBFCs on a back foot and certain banks are well positioned to capitalize on this opportunity)
iii) IT and Pharma – The strengthening of the US dollar and with the sectors being at the bottom of the cycle we expect both the sectors to see a revival going ahead.Q. What are the major good and bad factors that will drive and drag
markets in the next one year?
A. The good factors that shall drive the market are: The revival in the manufacturing segment, existing government's strong focus on revival of the rural demand, performance of the pivotal schemes implemented by the existing government and possible spillover benefits of the US-Sino Trade war boosting Indian exports.
While the outcome of general elections, crude oil prices after Iran sanctions environment, Fed rate hike, performance on the US economy, trade war tensions, inflation and IIP of the economy remain key concerns for the market and may produce a drag in market performance.Q. DIIs and mutual funds flow has been good compared to FII outflow. Will
it continue to support the market or is there any possibility of some
DIIs outflow going ahead?
A. In last one year, the market saw a net outflow of approximately Rs 97,000 crore from FIIs and a net inflow of Rs 1,25,000 crore. The FIIs made a net inflow only during January and March while DIIs have poured in money for the entire year which is an indicator of the continued faith of DIIs into the market and the Indian economy despite the steep correction in the recent months.
We believe that this trend shall continue during the coming year too, the only period we would be cautious is during the general elections wherein there could be a certain redemption owing to the increased volatility in the market.
Q. What are the top five picks for Samvat 2075?
1) increasing deal pipe,
2) Deeper penetration in large accounts,
3) Headwinds receding in the energy vertical
4) Improving quality of business (digital and platform-led growth) and,
5) Depreciating rupee.
On account of these factors we expect the revenues to grow at 25 percent CAGR (from Rs 1,112 crore currently to Rs 1,640 crore by FY20).
Reliance Industries: Target Rs 1,300
The country’s largest company is growing at a double-digit growth rate consistently for the past 3 quarters. With the current state of the economy and its growth, we believe that Reliance is set to benefit the most out of the India growth story.
We believe that Reliance's petrochemicals business will continue to grow owing to the current levels of rupee and price of crude oil, also owing to the festive season ahead we expect Reliance Retail to continue its growth momentum while the third revenue driver digital services business will also keep on expanding as well as its value-added services.
Owing to these factors we believe that Reliance industries will continue to grow at a double-digit rate even in the coming quarters and is a value buy at current price levels (especially after the recent correction from Rs 1,250 ) as it still trades at a deep conglomerate discount.
South Indian Bank: Target Rs 25
Founded in 1929, South Indian Bank is one of the oldest banks based out of Kerala. With most of the provisioning of the stressed assets behind them and their focus on aggressively growing its retail book, we expect the growth story to start unfolding.
The bank is actively working towards its target of opening 150 new branches. As a result, We expect the loan book to grow at a 16 percent CAGR to Rs 72,810 crore by FY20, driven by a 21 percent CAGR in the retail book. Further we expect NPAs to normalise to historical levels and, as a result, revenues are expected to grow at 14 percent CAGR.
NALCO: Target Rs 67
Due to disruption in the channels of import of aluminium from Allunote and Rusal (owing to measures by the government of India) the prices of aluminium has gone up leading to better realisations for NALCO. It is getting into various raw material related projects for better backward integration, these projects include a caustic soda plant and a newly conceived Coal Tar Pitch plant.
Other than these, the company is also in the process of developing two coal mines, which were allotted to it. As far as volume is concerned, NALCO aims to achieve 2.1mt alumina output and 415kt aluminium metal output in FY19. The company plans to spend Rs 1100 crore capex in FY19. We expect alumina prices to remain strong in the near to medium term, helping NALCO to put up a better performance.
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