BQ Edge | Why Gautam Shah Expects Nifty To Touch 13,000 By Year-End
The Nifty may hit the 13,000-mark by end of the year, irrespective of the outcome of general election, according to Gautam Shah, associate director and technical analyst at JM Financial.
“Indian markets remain in a long-term bull market that is likely to continue for many quarters. Having digested innumerable adverse news flow in the last few months, the market is on a stronger wicket,” Shah said at the Chennai edition of BQ Edge—the on-ground initiative of BloombergQuint.
“The shallow correction of 200 points from 11,750 levels recently after a 1,000-point rally indicates inherent strength. In the short term, the Nifty can test the psychological level of 12,000 and our working target of 12,222 in this run. In the medium term though, we would not be surprised if the Nifty tested the 13,000 mark by end of the year.”
The Three ‘Cs’
One of the key reasons that will hold the market higher is the three Cs—crude, currency and cash. Strong flows from retail investors, coupled with a stable rupee and oil prices, should keep the markets upbeat, Shah said. “Our top sectoral bets include banking, oil & gas and capital goods.”
Mid Caps To Outperform
Investors need to have a long-term perspective when investing in mid-sized companies, according to Shah.
“The ratio that measures the relative strength of the Nifty Midcap100 Index to the Nifty50 Index hit a record low in 2018,” he said. “Historically, when the ratio has hit such low levels, the mid-cap index has seen a sharp rally.” As a result, over the next three to five years mid caps may significantly outperform as the index is likely to touch the 25,000-mark compared to 18,253 where it is now.
No Election Hiccup
Investors tend to be cautious ahead of elections and hedge their positions. But traditionally, investors have witnessed positive returns during election years, according to Shah. “Six of the last eight election years have seen markets end higher. Of which, three gave returns in excess of 60 percent.”
Bank Nifty To Act As A Catalyst
Banking stocks, by virtue of their higher weight in the Nifty, are key in deciding which way the index will move. Even as the benchmark and broader indices slipped last year, Shah said the Bank Nifty managed to hold the ground trading in a 3,000-point range. “From the current levels, the Nifty Bank could touch 32,500.”