As 2013 dawns upon us, the future course of the equity markets is one that is being looked upon with cautious optimism. Calendar year 2012 was a tumultuous, albeit positive one for equities as they returned almost 25%. And the good news is that as far as equity valuations go, things can only get better for equities in the New Year. Manik Kumar Malakar spoke with several market experts and brings you their views...
How do you see equities in CY 2013?
There are multiple uncertainties affecting both the global and domestic markets. However, we feel that the down-side risk to the market is limited, while there is significant upside potential once things settle down. The fiscal cliff issue in US will get resolved in due course.
The threat of sovereign downgrade of India in 2013 is real and the consequences thereof are extremely scary. We remain optimistic about the future and would hope that the downgrade will not happen. In this context, it should be noted that the domestic economy, in spite of all the bad news, continues to grow at around 6% and the same is attractive enough for the global investors – downgrade or no downgrade.
MD & CEO, Destimoney Securities
The year 2012 has been a good year for the Indian market; though it witnessed some sort of volatility, the year 2013 looks very optimistic. We expect a rally of 10- 12% in the domestic markets in CY 2013 as the macros economic factors are expected to improve going forward.
On the Foreign Institutional Investors (FIIs), they have invested USD 22.22 billion (Rs. 1,16,550 crore) so far in 2012. India is relatively better off than the rest of other markets in Asia or other emerging markets for FII’s as Indian stock markets offer good opportunities in terms of diversification and stock picking because its corporate fundamentals seem more “stable”.
Equity Head, SMC Capitals Limited
However, the trend of the Indian currency will dominate. The Indian markets will enter into a multi-year bull run if Indian currency breaks the resistance at 51. In brief, dependency is more on the trend of Indian Currency. In the absence of the same we will come across with stock specific trend.
Head- Technical Research, Kotak Securities
The outlook for CY 2013 is positive. The expectations of fresh reforms, the budget and some easing from RBI are building up. This could be well received by the markets. Globally too, the uncertainties are reducing. This should keep the sentiments buoyant.
Nagji K Rita
CMD, Inventure Growth & Securities
CY13 is likely to be another good year for the Indian equity market. The abundant liquidity globally should drive substantial portfolio inflows into the country amid cyclical improvements in macro variables. H1 CY13 would see a revival in economic growth and a resumption of interest rate reduction cycle by the central bank would further aid the recovery in H2. We are in a structurally favourable environment for equities and market indices are likely to deliver 10-15% gains in CY13.
AVP – Research, IIFL
High liquidity along with the slew of economic reforms witnessed in the recent past indicates further strength in the coming months. However, we think that 6000-6300 will be a resistance zone for Nifty, and also because economy, though showing minor signs of revival has still a long way to go. The market is likely to show consolidation in the upper zone. In near future, likelihood of moderation in interest rates, decline in inflation, stable fundamentals, growing economy and rising disposable income along with rise in demand from developing segments can be significant for the market movement and can give the required thrust to it.
Sr. VP, Bonanza Portfolio
I feel that equities will do extremely well in 2013.
Kishor P. Ostwal,
CMD, CNI Research Ltd.
Which are the sectors that you are bullish on and why?
Bandyopadhyay: We have been focused on specific stocks. We believe that the index may not provide any great returns in the near future. However, there are significant attractive opportunities once one becomes stock specific. Our belief in Pharma as a sector continues to remain strong. We also like cement and sugar sectors at present. However, even in these sectors, midcap and small cap look more attractive.
Thunuguntla: For the year CY 2013, we are bullish on sectors like infrastructure, power and metal because the government is acting and these sectors should see good momentum building in the stocks. India’s infrastructure sector is poised for a big leap and offers significant investment opportunities for investors. The gearing of the Indian economy with the approval of Foreign Direct Investment (FDI) in retail may spark a fresh spurt in infrastructure. Indian government expects that the private sector, through public-private partnerships or PPPs, will invest around $350-400 billion in infrastructure sectors such as roads, ports, railways and airports.
With the improved infrastructure and construction activities in India and the expectation of revival of the global economy, the metal sector is poised to see an uptrend due to the favourable demand. The Power sector is also expected to give a turnaround valuation in the year ahead after its nearly 5 years long break. The power companies in India which have so far been establishing their units for power generation are now going to start their operation and in coming quarters we are going to see good valuations.
Goyal: Corporate earnings have shown significant improvement especially considering the slow pace in economy worldwide. Particularly some of the sectors like FMCG, Pharma, Private Banking, Autos and Consumer Durables have seen positive growth. We remain optimistic in these sectors.
Rita: The BFSI space should be attractive in case the markets continue to maintain its upward momentum. We could also see some positive action in the metals space as commodity prices remain buoyant. Bullish trends can also be expected in the mid-cap and small-cap space and we could see these stocks catching up with the blue-chips in terms of valuations.
Mehta: Since we are anticipating an economic recovery and rate cut cycle in CY13, we are bullish on financials. Within the segment, we like private banks and NBFCS more than public banks. We are bullish on auto ancillaries due to the strong replacement demand. The Media sector looks exciting with the onset of mandatory digitization. We also feel there are buying opportunities in pharma and mid-cap cement stocks.
Chouhan: We are specifically bullish on Media, Private Banks, NBFCs and Consumer Durables. We feel that these sectors are unrelated to global developments.
Ostwal: Infrastructure, Banking, Auto, Metal, Education, Tea, Media, Realty, Retail and Civil Aviation will do well in 2013. I firmly believe that rate cuts will drive growth.
Which are the sectors that you are bearish on and why?
Thunuguntla: IT may remain as underperformer in the year 2013. The thought goes as – The IT sector of India is directly linked with the performance of the two giant economies such as US and Europe, as much of its revenue is generated from theses two economies. Additionally, if the US President Obama’s stick to his election mantra of “anti outsourcing” it may hindrance the performance of the Indian IT companies in US. With the Indian Rupee depreciation story almost having played out, the IT sector may not witness any significant benefit from this in the year 2013.
Goyal: Sectors to be avoided are IT and Infrastructure. Infrastructure has been underperforming in the long term and the IT sector is showing weakness in near term, despite the broad-based market rally.
Rita: The FMCG sector has been the favourite of investors for the past couple of years. And this particularly, has made the valuations rich. However, going forward, we could see a shift of funds from FMCG to attractively valued sectors.
Mehta: Revenue growth visibility has weakened for the IT sector as manifested by few large companies in the past couple of quarters. Prospect of most companies in Metals & Mining has been hampered by weak product demand globally, higher input costs and issues around project clearance and mining. Some of the richly valued consumption stocks may also underperform as portfolio managers cut risk in their portfolios.
Chouhan: Our observation and past experience says that whenever the market remains in a bullish trend, each and every sector performs and that is why we are not bearish on any specific sector. But yes we will reduce our exposure from defensive sectors like FMCG and Pharmaceuticals.
Ostwal: We are bearish on MNC de-listing cases and consumption theme stocks as they are extremely overvalued.
Bandyopadhyay: We will advise investors to buy select Pharma, Cement and PSU stocks. In Pharma, we like Glenmark and Indoco Remedies. In Cement we like Heidelberg and amongst PSUs, Balmer Lawrie and NTPC.
Thunuguntla: My recommendations are with sectors like cement, banking and automobile. From the banking sector I would suggest private sector banks as these banks are expected to exceed public sector banks by huge margins due to capital adequacy and ability to raise equity capital at a reasonable valuation and low (Non-Performing Assets) NPA’s.
Goyal: ITC, Cipla, ICICI Bank and Titan are some of the stocks which can be bought for medium-to-long term perspective because of their healthy and consistent quarterly numbers and growth potential.
Mehta:Our Top recommendations for the year CY13 are the following stocks. ICICI Bank , ING Vysya Bank , LIC Housing Finance , Dr Reddy’s Lab, Exide Industries, ZEEL and finally JK Lakshmi Cement.
Ostwal: Century, Bombay Dyeing, BBTC, Goodricke, Karnataka Bank, Dhanlakshmi Bank, Lakshmi Vilas Bank, Mukand Engg , B F Utilities, Adani Enterprises, Clariant Chemicals, Tata Steel, Hindalco, JSW Steel, SBI and IFCI.
Bandyopadhyay: We don’t expect the Sensex or Nifty to perform any wonders in CY13. However, with growth back on track post RBI lowering interest rates (as expected in CY13) we will see the index/Nifty moving up by 10-15%. Thus, Nifty can move up to around 6600 whereas Sensex can move to around 22000.
Thunuguntla: From here we expect market growth of 10%-12%; Nifty to touch 6500 levels while Sensex to rally to 21800 in CY 13.
Goyal: We expect can see new highs above 6335 level, up to 6500-6600 on the Nifty in 2013.
Rita: In CY13, the Index is expected to come close to the previous life time high.
Mehta: Our Nifty target range for end CY13 is at 6400-6600
Chouhan: On the higher side 6300 will act as a major resistance level, but above that 6700 is not ruled out. On the down side, 5300 will act as a final support for the market and a break of same will again turn sentiment down.
Ostwal: Nifty 6600 plus and Sensex 24000 plus.