Election Results 2019: 10 Market Veterans On Record Day For Indian Equities
Will the equity market euphoria be short-lived in the face of a slowing economy?
It smelled like a record-breaking day, with early leads indicating the return of the Narendra Modi-led government with a landmark victory.
At 10:45 a.m. the benchmark indices did a record tango with the NSE Nifty 50 crossing 12,000 and the Sensex breaching 40,000, for the first time ever. But will the euphoria be short-lived in the face of a slowing economy? Here’s what 10 market experts told BloombergQuint.
Billionaire Investor Rakesh Jhunjhunwala
Don’t expect the stock market to rally over the next two-three months, but it may spend this time laying a strong foundation for the next bull run.
The mid- and small-cap stocks are likely to outperform their larger peers in the next 18 months. Iam not worried about anything. They [equities] will give returns better than nominal growth. (Catch the full interview here)
Saurabh Mukherjea, Founder, Marcellus Investment Managers
The Nifty as a whole is clearly significantly overvalued. However, consistent compounders like Asian Paints Ltd., ITC Ltd., Page Industries Ltd., Kotak Mahindra Bank Ltd. I reckon are still undervalued.
Nilesh Shah, MD and CEO, Envision Capital
From a short-term perspective, markets are looking slightly overvalued but we should be fine if earnings growth starts to gain momentum.
Gautam Chhaochharia, MD and Head of India Research, UBS
Though NDA 2 is sentimentally positive for the markets, broader policy reform narrative will drive markets from here on. Valuations will sustain or re-rate depending on the reforms laid out by the government.
The economy needs capital formation for higher growth, and we will be keenly watching out for that. India has a golden opportunity from the multi-year trend of shift of manufacturing from China. Now with a political majority, India has the chance to tap this opportunity which in turn will lead the GDP growth rate back to 8-9 percent.
Need to look at policy measures by the government to take banks and NBFCs back to credit growth mode without hurting macro stability measures.
Raamdeo Agrawal, MD and Co-Founder, Motilal Oswal
Twenty-four months ago, mid caps rallied by 35 percent. Correction is always painful. PE multiples are at 20-25 times. Corporate profitability has come down to 2 percent of the GDP. New opportunities need to be opened up to create wealth. Next 5 years will be great for earnings and it will be the best for SBI, which will be the leader of the pack.
Sanjay Dutt, Director, Quantum Securities
Nifty at 12,000 is at the upper end of the range for rest of the year. Valuations (constituents) do not justify 12,000 plus on a sustainable basis. Now the rally needs to get broader as policy action, liquidity and other issues are addressed in the economy. I would advise investing in good quality second tier stocks across sectors than betting on concentrated Nifty positions or the typical 7-10 stocks that have been taking the Nifty higher. Individual stocks and sector earnings will be back in focus and also EM flows and other global issues.
Vikas Khemani, Founder, Carnelian Capital Advisors
Further direction of the market will depend on government policies and especially ones focusing on economic revival. Do not see significant correction hereon. Rather see more upside than downside for the markets.
Dilip Bhat, Joint MD, Prabhudas Lilladher
We are seeing a slowdown in certain sectors that will have an impact on the GDP numbers. Markets will now have to think of how the government will address the budget once the euphoria dies down.
Chakri Lokpriya, MD and CIO, TCG Advisory Services
Though markets have touched an all-time high, I would say it is the right time to invest. In the last five years earnings growth was subdued, but now going forward this is expected to change as a cyclical recovery will now take place which will be led by banking, industrial and consumer stocks.
Bank earnings are expected to improve as the NPA issues are getting resolved. This will improve banks’ balance sheets and lead to credit growth which in turn will lead to pick-up in private capex and consumer spending.
It will take at least 2-3 quarters for earnings, capex and consumer growth to pick-up. FY20 is going to be a year of recovery and FY21 will be the growth year. As the same government is expected, there is no uncertainty when it comes to reforms.
Atul Suri, CEO and Chief Investment Officer, Marathon Trends Advisory
With the markets breaking out to new highs and a major event going in the markets’ favour, we are in for a leg up of 12-15 percent over the next one year. We think that ‘financials’ as a pack will continue to lead the markets to newer highs, while out-of-favour sectors like capital goods will attract new money.