The markets are at new closing highs; FIIs have pumped in billions of dollars, investors are brimming with confidence, while the indices have performed better than the best in the Asia Pacific region in dollar terms. With the swearing-in ceremony today, Narendra Modi will take over the reigns of the country as the Prime Minister. The suspense of Cabinet Minister appointments will be unveiled as the markets eagerly await the name of the new Finance Minister who will present the next budget by early July. 'There forth a new story will begin', says Dominic Rebello reflecting the mixed views, recommendations and some advise for the government from the market experts he has spoken to...
Though the markets are trading at their highest earning multiples, there is still a strong bullish undertone amongst the market participants anticipation a slew of reforms, which could help take the markets further up. However an alternate story is that; its time for some consolidation. Yet, if a market friendly finance minister is appointed, expect another immediate run up this week.
Where do you see the Sensex by December 2014
Though in the short term the markets might consolidate, our take is that over the next two years we might step in to a phase where corporate earnings shall see substantial improvement and emerge out of the margin pressures witnessed due to adverse operating leverage and high interest costs. An improvement in global growth and hence in external demand environment, GDP growth having bottomed out and hence expectation to it trending upwards, and deceleration in food inflation are also some of the key positive impulses for the markets going forward. We attribute a 15.5x multiple to our Sensex EPS based on FY2016E earnings and arrive at a target of 27,300 for the Sensex over the next one year.
Mayuresh Joshi, VP-Institution, Angel Broking
We see the inflows into the market continuing till the year end. Our target for the Sensex by December 2014 is 27500.
JK Jain, Research Head,
Karvy Stock Broking
If the government is able to accomplish just a few tangibles, with decisive reforms and avoid major public blunders, showing that it is in full control then we can expect the Sensex to hit 30,000 by year's end. It is not necessarily what the PM is able to accomplish by year's end that will decide where the Sensex stands, but more on projecting a sense that he is in control on the overall state of affairs.
Raghu Kumar, Co-founder,
RKSV
By using projection techniques, we expect Sensex to test 30300 by Dec 2014.
Ajit Mishra, AVP – Retail Research,
Religare Securities
According to you which are the 3 best stocks to hold till December 2014?
Larsen and Toubro, ICICI Bank, Tata Motors and Power Grid.
Mayuresh Joshi, VP-Institution, Angel Broking
We recommend to hold the high beta stocks which performed in the recent rally to do well. Thus, we like LT and ICICI as our top pick to hold till December. Also, we like TCS in the IT space which has underperformed recently to do well in rest of 2014.
JK Jain, Research Head,
Karvy Stock Broking
IDFC, Larsen & Toubro, and DLF. I believe that the infrastructure sector is going to benefit the most this year.
Raghu Kumar, Co-founder,
RKSV
ICICI Bank: Among the better placed banks with a meaningful expansion in footprint over the last 5-6 years coupled with high Tier-I capital. Expect retail loans to grow faster than corporate loans driven by higher branch productivity and pick-up in GDP growth, supporting 16% earnings CAGR through FY16.
Crompton Greaves: Expect continued stability in domestic operations along with a marginal recovery in international subsidiaries through FY15/FY16. Faster-than-expected turnaround in international operations would be a key stock trigger.
Sun Pharma: Strong base business (India/US) and potential turnaround of Ranbaxy’s profitability to drive out performance.
Ajit Mishra, AVP – Retail Research,
Religare Securities
What should be the Modi led government’s target; inflation or growth?
In fact the impetus would be to improve GDP and control Inflation. An improvement in global growth and hence in external demand environment, GDP growth having bottomed out and hence expectation to it trending upwards, and deceleration in food inflation are also some of the key positive impulses for the markets going forward.
Mayuresh Joshi, VP-Institution, Angel Broking
We don’t see growth picking up immediately. However, we see the growth target for the government would be 8% plus in the coming years. While, inflation (CPI) targets will similar to RBI target of 7% by March 2015 and 6% by March 2016
JK Jain, Research Head,
Karvy Stock Broking
Ideally, what should happen is that the RBI should focus on inflation and attempt to bring WPI inflation levels comfortably below 5%, while the government focuses, independently, on reviving economic growth. The government's main focus should be on growth while not hindering on RBI policies. When the RBI meets on 3rd June, it should have the power to remain independent and make the necessary changes to reduce inflation, which might conflict with growth. For example, it might decide on raising the headline Repo rate from 8% to 8.25%; increases in interest rates are usually negatively correlated with economic growth. But the government needs to focus on GDP and revive the economy by making changes and reforms to promote growth.
Raghu Kumar, Co-founder,
RKSV
For any economy to grow, they should be in equilibrium. So we believe that the government, alongside with other agencies, should try to strike that balance between these two.
Ajit Mishra, AVP – Retail Research,
Religare Securities
Where do you see the market heading post the swearing-in of Narendra Modi as PM and before the Budget
The markets shall consolidate till the Budget probably in the 7000-7500 range on the Nifty. Any positive reform processes announced in the budget should provide a further fillip to the markets.
Mayuresh Joshi, VP-Institution, Angel Broking
As market have seen a good rally during the election period; we don’t see a big bump up from here. We see the markets trading in the broad range of 23000-26000 levels till the Budget.
JK Jain, Research Head,
Karvy Stock Broking
Right now, the markets in a euphoric mood, despite that fact that any tangible changes or reforms the PM makes would take time to materialize. What was badly needed, which has been accomplished now, was a stable government that could deliver reforms in a decisive manner. We can expect an increase in IPO's and an uptrend in the markets for months to come as investors place faith in the markets and push stock prices up.
Raghu Kumar, Co-founder,
RKSV
After the rally during the recently concluded election, we expect benchmarks to pause a bit in near future; however any decline would attract renewed buying as most investors were waiting for clarity. And, tillthe budget, we believe that stock specific moves will dominate the market trend.
Ajit Mishra,
AVP – Retail Research,
Religare Securities