After Samvat 2071 wash out, Sensex poised for a 20% upswing in 2072 on reforms boost
Brokerage houses Geojit BNP Paribas Financial Services, Equinomics Research & Advisory and Kotak Securities expect the benchmark Sensex and Nifty to usher in gains between 10-20 percent by Diwali 2016
Domestic equity markets may be yet to fire on all cylinders in the run-up to the upcoming Diwali festival, but experts and local brokerages are unfazed by the prevailing subdued sentiment as they are confident of the indices' superlative performance over the next 6-12 months.
Top officials of domestic brokerage houses such as Geojit BNP Paribas Financial Services, Equinomics Research & Advisory and Kotak Securities with whom Firstpost interacted expect the benchmark Sensex and Nifty to usher in gains between 10-20 percent by Diwali 2016.
Stock market experts believe the Samvat 2072 will mark the return of bulls, which faced torrid time in the last six months after starting off 2015 significantly well. Much of the confidence for local brokerages with regards to key indices' likely upsurge going ahead stems from the fact that economic fundamentals have been steadily improving.
Growing optimism that the government will take more proactive measures to usher in more reforms and prop up the economy will certainly lead to higher retail and foreign investor participation, thereby providing a major boost to the markets, said G.Chokkalingam, founder & managing director of Equinomics Research & Advisory.
According to Chokkalingam, both the indices would rise up to 20 percent from the current levels as the recent spate of positive signals emanating from steadily moderating monthly inflation levels, controlling twin deficits and higher tax collection numbers will help improve market sentiment to a larger extent.
With markets looking for big-bang reforms in the form of passage of Goods and Services Tax (GST) reforms and more clarity on land reforms, equity market revival would soon be on the cards, said Chokkaligam.
Alex Mathews, head technical and derivatives research at Geojit BNP Paribas Financial Services, expects the benchmark Nifty to reach 8,700-mark in the near to medium term and by next one year to hover around 9,600-mark.
Similarly, a top official from Kotak Securities, who requested anonymity, too, is betting big on the markets, and sees a 10-15 percent rise in the indices in the next 12 months.
On the sectoral front, shares of quality PSU and private banks could perform well in the first six months, and the tide would later shift to capital goods, infrastructure and power firms in the remaining period, said Chokkalingam. With the government capital spending accelerating in the past few months, he expects investment cycle to pick up momentum in the next six months, thus bolstering investor interest in these stocks going ahead.
Buying interest in selective mid-cap space will persist in the long run, especially in companies sensitive to global commodities as prices of most of the raw material inputs may stay benign for next one year or so, asserts Chokkalingam. He is also betting big on stocks such as Axis Bank, Hindustan Zinc and Coal India etc.
With the rupee staying less volatile against the dollar compared with its peers from other emerging economies over the last 6-8 months, Alex Mathew of Geojit favours pharma, IT and automobile sectors to outperform the market going ahead. However, he sees pain continuing in the power generation space due to lack of clarity over the mounting losses for state power distribution units besides the lingering environmental issues clouding several power projects.
Contrary to the above case, Kotak Securities thinks domestic cyclical theme will be played up in the market over the next one year, as economic revival would augur well for sectors such as capital goods and infrastructure companies.
Even as brokerage houses repose lof of faith in the stock market going head on hopes of improved economic fundamentals, the current Samwat 2071 rather showcased a dull performance from the local indices. From last Diwali, which fell in the month of October, the benchmark Sensex has fallen 1 percent until yesterday's closing levels, in sharp contrast to its performance over the previous three years.
In the last three occassions, the benchmark Sensex gained 8 percent in Samvat 2068, followed by 14 percent rise in Samvat 2069 and a robust 26 percent upsurge in 2070, which mainly benefitted from a change of leadership at the Centre and huge expectations from the new government.
However, market experts reckon with the US Fed poised to fiddle with key rates by early next year and the European Central Bank hinting at a fresh stimulus, fund inflows could once again gather pace in emerging economies, including India, leading to a sharp rally in key indices.
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