LIMITED UPSIDE SEEN FOR MARKETS
At a time when the global equity markets have been reeling from the pressure of a possible escalation in trade wars, the Indian markets have been resilient
Since the recent low of 32,483 levels hit on March 23, 2018, in intra-day deals, the S&P BSE Sensex has climbed nearly 12 per cent to hit a record high of 36,533 on Thursday.
Analysts say the up move in the benchmark indices has been on account of a rally in only a clutch of stocks basis the news flow rather than the rally being broad-based. This, they feel, is cause for concern. In this backdrop, they see a limited upside for the benchmark indices from here on.
“The rally has not been broadbased. One news-based trigger has been causing select large-caps to rally. Moreover, crude oil prices plunged overnight and that has also fuelled an up move in the oil-marketing companies on Thursday. This resilience/up move led by a handful stocks is not a good sign. That apart, the mid- and small-caps are yet to catch up with their larger peers,” says Tirthankar Patnaik, India Strategist, Mizuho Bank.
And the data proves him correct. While the S&P BSE Sensex has climbed over 12 per cent since its recent low, the S&P BSE mid-cap index has gained to 0.3 per, while the S&P BSE small-cap index has slipped around 2 per cent.
Among individual stocks, Tata Consultancy Services (TCS), Kotak Mahindra Bank, Hindustan Unilever (HUL), YES Bank, Mahindra & Mahindra, Asian Paints and HDFC Bank from the S&P BSE Sensex have been the top gainers, rallying 16 per cent to 34 per cent during this period, the ACE Equity data shows.
Meanwhile, the S&P BSE mid-cap (at 15,753 levels) and the S&P BSE smallcap index (at 16,539 levels) are still around 14 per cent and 18 per cent away from their respective all-time highs.
“Now that the frontline indices have rallied sharply from their recent lows, there is a possibility that the mid- and small-caps will take over. They have underperformed their large-cap peers over the past few months. The S&P BSE Sensex and the Nifty50, I feel, are treading on thin ice,” says G Chokkalingam, founder and managing director, Equinomics Research.
Going ahead, with the country getting into election mode (state elections as well as the Lok Sabha elections), uncertainty is likely to set in, which, in turn, will keep the markets, especially the large-caps, range-bound, analysts say.
Patnaik of Mizuho Bank sees the Nifty at around 11,500 by December 2018-end, an upside of 5 per cent from the current levels.
“Market valuations are stretched. The consumption-related sector and stocks that have done well of late are richly valued. Given the slide in the rupee, while information technology (IT), pharma and metal companies are likely to do well, the consumption story will be hurt,” he says.
R Sreesankar, co-head for institutional equities at Prabhudas Lilladher, maintains a near-term trading range for the Nifty50 between 9,640 and 10,000 levels. HDFC Bank, ITC, Maruti Suzuki, State Bank of India, ICICI Bank, Indian Oil Corporation, HCL Technologies, IndusInd Bank, Larsen & Toubro, Mahindra & Mahindra, Titan Company, YES Bank, Britannia Industries, Tata Steel, SBI Life and Petronet LNG are his top picks in the large-cap universe.