After sharp rally, the market could consolidate: Sharekhan
Mumbai: Calling it a rally born amid pessimism, a Sharekhan report suggested that the markets may have rallied too fast, too soon. According to the report, the MSCI Developed Market Index is up by close to 7% while the MSCI Emerging Market Index has gained close to 10% in 2017, however MSCI India Index has surged by 14% in the same period.
It said the Indian market has absorbed a slew of negative news ranging from demonitisation, a change in the Reserve Bank of India (RBI)’s monetary stance and highly volatile global bond and foreign exchange (forex) markets.
The brokerage said now the attention would shift to politics locally and that overall, volatility could return globally. “The outcome of the ongoing state elections scheduled to be announced on March 11 could influence market direction in the immediate term,” it said and added that globally, the Federal Reserve meet on March 13 is a key event ahead. The Donald Trump administration is also expected to spell out the details of the much touted fiscal stimulus plan that involves huge investment on infrastructure development in the USA, the report added.
However, it said the valuations no longer remain cheap with the headline price-earnings (PE) multiple of the Sensex trading at 17.0-17.5x FY2018 and 15.0-15.5x FY2019 consensus estimates which is at a premium to the historic average multiple
after the recent sharp rally. Affected by the near-term pessimism, the benchmark indices are also likely to remain volatile in the immediate term, the report added.
“Our base case scenario would be consolidation around the current elevated levels for the next few months,” it said.
The brokerage said it maintains its overweight stance on the retail-focused private banks and non-banking financial companies, automobile and auto ancillary, cement, and oil & gas companies eg Petronet LNG, Gujarat State Petronet along with Indian Oil Corporation and Reliance Industries.
It said the Indian market has absorbed a slew of negative news ranging from demonitisation, a change in the Reserve Bank of India (RBI)’s monetary stance and highly volatile global bond and foreign exchange (forex) markets.
The brokerage said now the attention would shift to politics locally and that overall, volatility could return globally. “The outcome of the ongoing state elections scheduled to be announced on March 11 could influence market direction in the immediate term,” it said and added that globally, the Federal Reserve meet on March 13 is a key event ahead. The Donald Trump administration is also expected to spell out the details of the much touted fiscal stimulus plan that involves huge investment on infrastructure development in the USA, the report added.
However, it said the valuations no longer remain cheap with the headline price-earnings (PE) multiple of the Sensex trading at 17.0-17.5x FY2018 and 15.0-15.5x FY2019 consensus estimates which is at a premium to the historic average multiple
after the recent sharp rally. Affected by the near-term pessimism, the benchmark indices are also likely to remain volatile in the immediate term, the report added.
“Our base case scenario would be consolidation around the current elevated levels for the next few months,” it said.
The brokerage said it maintains its overweight stance on the retail-focused private banks and non-banking financial companies, automobile and auto ancillary, cement, and oil & gas companies eg Petronet LNG, Gujarat State Petronet along with Indian Oil Corporation and Reliance Industries.
