33% of par­tic­i­pants ex­pect Nifty to hit 10,300-10,500 by the end of 2017

About two-thirds of par­tic­i­pants said they did not ex­pect mar­ket to cor­rect more than 5%, mainly be­cause of re­lent­less buy­ing by mu­tual funds

The Economic Times - - Front Page - Our Bureau

Ex­pec­ta­tions of a re­vival in cor­po­rate earn­ings have been baked into stock prices af­ter the re­cent record-break­ing rally but there is yet more steam left in the mar­ket run-up. The Nifty could give at least 2-4% re­turn by De­cem­ber, said a ma­jor­ity in an ET poll of 25 lead­ing fund man­agers, re­search heads and bro­kers con­ducted over the week­end.

The poll showed 33% of the par­tic­i­pants ex­pect the Nifty to hit 10,300-10,500 by the end of 2017 against Fri­day’s 10,066 close. Re­liance In­dus­tries, ICICI Bank and State Bank of In­dia are the top picks.

Poll par­tic­i­pants main­tained their pos­i­tive bias on the mar­ket’s di­rec­tion but un­like pre­vi­ous fore­casts, the op­ti­mism was tinged with watch­ful­ness given the al­most uni­lat­eral run-up in stocks that has led to the Nifty cross­ing the psy­cho­log­i­cally cru­cial 10,000 mark. Fur­ther de­lays in the much-

awaited re­bound in earn­ings re­cov­ery, geopo­lit­i­cal risks and el­e­vated share val­u­a­tions were the top con­cerns for most poll par­tic­i­pants.

Fewer poll par­tic­i­pants were will­ing to as­sign ag­gres­sive tar­gets to the Nifty for the year end. The most op­ti­mistic —10% of par­tic­i­pants — felt the Nifty would cross 12,000 by De­cem­ber, which is 19% above the in­dex’s Fri­day clos­ing price. A fifth of poll par­tic­i­pants ex­pect the Nifty to end the year be­tween 10,800 and 11,000, which is a nearly 10% up­side, while 14% said the in­dex could close at 10,500 to 10,800.

“The In­dian stock mar­ket is priced to per­fec­tion,” said Nilesh Shah, CEO, Ko­tak Mu­tual Fund. “The up­side is capped by val­u­a­tions and geopo­lit­i­cal events while the down­side is lim­ited by liq­uid­ity, smooth im­ple­men­ta­tion of GST and ex­pec­ta­tion of a bet­ter de­mand in the forth­com­ing fes­tive sea­son.”

About two-thirds of par­tic­i­pants said they do not ex­pect a cor­rec­tion of more than 5% in the near term. This is mainly be­cause of un­in­ter­rupted purchases from do­mes­tic mu­tual funds, the eq­uity schemes of which have been in­un­dated with in­flows from re­tail in­vestors, who are con­tin­u­ously shift­ing in­vest­ments from debt, real es­tate and gold to stocks, where the bull run will en­ter its fifth year in Septem­ber. Bro­kers said what was dif­fer­ent in this rally com­pared with the pre­vi­ous one is the ab­sence of a cor­rec­tion.

“Mar­kets are over­heated but re­luc­tant to fall as un­in­ter­rupted flow of liq­uid­ity lim­its fall in ev­ery weak­ness,” said Moti­lal Oswal, chair­man and man­ag­ing di­rec­tor, Moti­lal Oswal Fi­nan­cial Ser­vices. Ko­tak’s Shah said he does not ex­pect a “ma­jor cor­rec­tion in near term ex­cept a few tech­ni­cal ones”.

So far in 2017, the Sen­sex and Nifty have gained 23%. While Re­liance In­dus­tries has out­per­formed the mar­kets so this year with 50% re­tur ns, ICICI Bank and SBI have gained 29% and 23%, re­spec­tively.

Do­mes­tic mu­tual funds have in­veste d nearly ₹ 5 3 , 0 0 0 c r o r e s i nce Jan­uary, while for­eign port­fo­lio in­vestors (FPIs) have pumped ₹ 58,000 crore into In­dian stocks so far com­pared with ₹ 38,000 crore in the sim­i­lar pe­riod last year. For­eign in­flows slowed down in July but few overseas in­vestors have been in a hurry to sell de­spite clear in­di­ca­tions of the US Fed­eral Re­serve sig­nal­ing that it in­tends to roll back its loose mone­tary pol­icy. Higher in­ter­est rates in the US could lead to a stronger dol­lar, erod­ing for- eign in­vestors’ share port­fo­lio val­ues in In­dia.

WHAT TO BUY

Poll par­tic­i­pants are ad­vis­ing in­vestors to stick to banks — es­pe­cially pri­vate sec­tor ones — au­to­mo­biles, con­sump­tion, ce­ment and metal themes. At the same time, the par­tic­i­pants warn that sec­tors such as in­for­ma­tion tech­nol­ogy and pharma may con­tinue to un­der­per­form the mar­ket. Among mid-caps, RBL Bank, Ex­ide In­dus­tries, Voltas, Graphite In­dia and Ramco Ce­ment are likely to be out­per­form­ers.

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