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Markets Could End 2012 with a Bang

Monday, October 15, 2012

In the midst of the recent high volatility, equity markets are displaying an upward bias. Yet, there is concern as the results season unfolds and mixed numbers emerge. Then there are international influences, as well… So, what next? Manik Kumar Malakar spoke to some market experts to try and gauge the future course of the markets for the rest of Calendar Year 2012. The general consensus is that the markets are expected to perform well and offers an ‘entry opportunity for the retail investor’.

How do you view the markets in the rest of the CY 12 period?
Dr V K Vijayakumar, Investment Strategist, Geojit BNP Paribas Financial Services:
We are bullish on the markets. The ‘risk on ‘ initiated by the ECB decision to buy unlimited quantity of stressed country bonds, thereby substantially mitigates the possibility of a financial contagion, and the QE3 from the Fed has created an ideal setting for a further market rally.

Shrikant Chouhan, Head, Technical Research, Kotak Securities: 
The winter session of parliament will play an important role.  But it seems that market has formed a strong base at the 5000 levels and might not fall beyond 5400 so easily.  Buy on dips is the advice.

Vijay Kedia. Director Kedia Securities: 
The markets should be lively and exciting till December. Many beaten down sectors should catch up with the uptrend and many already risen sectors i.e. FMCG should pause a bit. Overall market should be in an upper range till December, unless the government falls.

Rajiv Mehta, AVP – Research, IIFL 
The up move in the market would be driven by continuance of substantial portfolio inflows and an improved participation by domestic, institutional and retail investors. The key risks for the market would be elevated inflation, implementation of reforms, political instability and worsening of the crisis in Europe.

Kishor P. Ostwal, CMD, CNI Research
The excess liquidity is driving the market and hopes of more reforms from the Government will keep the fire alive. The immediate trigger seems to be RBI policy on 30th October where a rate cut is expected. This will push growth and take off borrowings for expansion.

Sudip Bandyopadhyay, MD & CEO, Destimoney Securities
We feel that the markets during the balance few months of CY12 should remain buoyant and maintain a positive bias. 

Sunil Jain, Head Equity Research – Retail at Nirmal Bang
We feel the equity markets may continue to perform well in the coming three months.

K Jayaraman-Research Associate-Bonanza Portfolio Ltd.
Certainly there is optimism in the market after the change of attitude from the government…Having said that, the concern is that the government is still not politically stable as many parties make conflicting statements and throw the hat on the ring.

Uday Narayan Dubey VP, Research & Institution Business from R K Global
ndian equities are doing well and can be expected do well in remaining CY12.

Shantanu Deb Mookerjea – Executive Director, Equity, LSI Financial Services Pvt Ltd.
We expect the market to be range bound. We do not expect any major upside or downside in December 2012.

Milan Bavishi-Head Research- Inventure Growth & Securities
The markets are expected to remain volatile over the next three months and this is primarily, due to volatility of the US dollar.

Any number for the indices?
Ostwal, CNI Research: I think Nifty will cross 6000 and the Sensex 20500 in 2012.

Chouhan, Kotak Securities:  Till December the markets should be good and might remain in a range of 6000 and 5500.

Mehta, AVP – Research, IIFL:  We expect the Sensex to touch t 20000-21000 by December-end.

Vijayakumar, Geojit BNP Paribas Financial Services:  We feel that Sensex level of 20000 is possible in 2012. It will be safe to assume that 5400 will be a floor for the market now.

Bandyopadhyay, Destimoney Securities:  With the possibility of rate cut by RBI looming large on the horizon, we expect the market to rally and touch 20,000 (BSE) and 6000 (NSE) levels by December’12.

Jain, Nirmal Bang:  we may see Nifty around the 5,900 to 6,000 level during this period.

Jayaraman, Bonanza Portfolio:  The market could correct and make a new thrust attempt to cross the previous all time high only during first half of 2013 depending on budget and other economic developments and global environment. Therefore the range for Nifty till December could be between 5400 to 6000. The markets may undergo small corrections before touching 6000 before the year end.

Dubey, RK Global:  I think the rally will continue as macros will improve. Not only that I also believe, we are slowly moving towards new bull market and we might see a new high by early CY13, if the UPA government stays in power. I think the only associated risk is global macro and political uncertainty.

Mookerjea, LSI Financial Services: We expect the Sensex numbers between 18000 to 19500 and Nifty to be between 5470 to 5950.

Bavishi, Inventure: If the rupee gains from here on, Nifty has the potential to rise to 5940-6200 over the coming months. Fundamentally, the rise in the markets would be supported by positive news flow from Indian government (reforms), bullish sentiments due to monetary easing programs in US and EU and FII flows.

On the flip side any weakening to around 54.70 could bring further pressure in the markets and in that case a correction till 5300 on Nifty can’t be ruled out. However, we do not expect a correction below 5300 and that level would present a long term buying opportunity for value investors.

If you are bullish, then what sectors/companies would you buy and why? If bearish then which sectors would you sell and why?
Ostwal, CNI Research - I am negative on the auto sector and United Spirit. Auto numbers are very weak and the demand take off will take a long time. At the same time the rising fuel costs and overall inflation is now making the 4-wheeler a luxury instead of necessity.

I am positive on metals and realty and infra stocks especially Tisco, BBTC, Bombay Dyeing, Century, JP Associates, HDIL. In Metal, the sluggishness is coming close to an end and QE 3 will drive China demand very soon which is a larger factorfor a  metal drive.

Chouhan, Kotak Securities - We are specifically bullish on Banks and Infra stocks. Bank Baroda, PNB, Allahabad Bank and SBIN are top picks from the PSU basket.  Amongst private banks; Yes Bank, Kotak Bank and DCB.

For Infra pack we are looking at Larsen, IVRCL Infra, NCC and JP Associates.
Even Metal stocks are showing better strength and in that space look at Hindalco and Sterlite.
Technology, Auto stocks may remain in a range and are good for trading.
FMCG and Pharmaceutical stocks buying is advisable on declines.
Real Estate will remain most volatile and we might favor, Bombay Dyeing, Godrej Industries, DLF and HDIL.

Kedia – Kedia Securities - I am bullish on the domestic consumers sectors including cement, pharma and housing finance companies which are reasonably leveraged and not affected by Crude, currency, and policies. In the short term I am not bullish on infra sector, but I will not sell them because our long term view is bullish on them.

Mehta, AVP – Research, IIFL - With the economic growth having bottomed out and interest rates easing, we are tactically bullish on domestic cyclicals. Financials the best proxy on the economy could outperform especially the banks with relatively attractive valuation such as ICICI Bank, Axis Bank, ING Vysya Bank and Dena Bank. The recently announced debt restructuring scheme and tariff revisions should improve liquidity of SEBs.

Also, we hope that fuel linkage issues for power generation companies would be sorted out soon. Resultantly, we are bullish on Powergrid, PTC, Kalpatru Power and KEC International.

We also like the auto ancillary space as the replacement demand is expected to pick up given robust auto sales in the past three years. Within this space, Amara Raja, Apollo Tyres and Motherson Sumi are our preferred bets. 

Vijayakumar, Geojit BNP Paribas Financial Services - Indian markets are likely to witness a sectoral rotation going forward. Consumer themes that are already highly valued need not actively participate in the rally, going forward. Beaten down cyclicals - consumer cyclicals like autos and industrial cyclicals like infra - are likely to perform better. Heavily beaten down themes in materials also warrant a look. We continue to be bullish on private sector banks.

Bandyopadhyay, Destimoney Securities - We are bullish on infrastructure and banking stocks.  In the banking space, large private sector banks (like ICICI etc.) are our favourite. On the infrastructure space, efficient companies in construction (such as - road) like ITNL are our favourite. We also like cement companies, particularly the small and mid-cap companies where valuation are still attractive.

Jain, Nirmal Bang - We are positive on banking, auto, consumer durables and pharma sectors. The companies which we are positive on are ICICI Bank (may benefit because of an interest rate cut and reasonable valuation), Infosys (valuation are very attractive and some improvement in business environment), Hero Motocorp (festive demand, interest rate cut benefit and attractive valuations), Maruti (festive demand, interest rate cut benefit and reasonable valuations), Tata Steel (China may initiate investment plan to revive growth which will lead to increase in demand for steel).

Jayaraman, Bonanza Portfolio - The current mood of the market is bullish towards rate sensitive stocks and over beaten sectors. The real estate and infra stocks are expected to perform better relatively and there is expectation of credit expansion and a soft interest regime going forward. DLF and HDIL could be attractive long term bets for 18 to 24 months with low risk on downside.

The cement sector is very bullish due to demand and pricing power from the second half of this year. This trend is likely to continue and Ultratech could be a good bet only on a correction of 15% from current levels.

The capital goods sector has been severely beaten down and it looks like the worst is already behind them. BHEL is an attractive long term bet at current levels investors can accumulate.

Pharma and FMCG continue to do well, but all the leading stocks in the sector are very expensive at current levels. It’s a hold and not a fresh buy at these levels.

Private sector banks like Axis Bank and Yes Bank are bound to appreciate along with the market as they are expected to announce robust growth and higher profitability.

Commodity sector and Automobile (both four wheelers and two wheelers) and Energy sector may be avoided for the time being. PSU banks also have asset quality concerns and increase in NPA’s in lieu thereof. Market is keenly monitoring the developments in this regard.

IT sector may have moderate growth with sideways movement.

Dubey, RK Global - I am bullish on the market. So, I will use a bottom up approach for buying. I will not bet on specific sectors. However, I believe government focus on reducing subsidy on LPG is a long term positive for Oil companies…I still believe this is stock picker market and a bottom up approach will be useful. I like ICICI Bank, TATA Motors, HDFC bank and other quality names.

Mookerjea, LSI Financial Services - We are cautiously bullish and in our opinion the sectors whose stock would do better in the period would be Aviation, Retail, and Healthcare.

Bavishi – Inventure - We prefer stocks such as Reliance Industries and BHEL at the current levels. In case of any correction, banking stocks such as ICICI bank and SBI would offer attractive buying opportunity at lower levels.

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