Nifty could record 15-17% return in Samvat 2074 — 5 wealth-creating ideas

Kshitij Anand

Moneycontrol News

Prakarsh Gagdani. Chief Executive Officer of IIFL Group subsidiary 5Paisa Capital, said in an interview to Moneycontrol that he is optimistic about the market in Samvat 2074 and sees the Nifty giving returns of 15-17 percent in the next one year.

Excerpts:

What is your call on markets for Samvat 2074?

The market looks extremely strong and amid a bull rally. The Nifty has already hit a high and the Sensex followed suit. So far as Samvat 2074 is concerned, I am optimistic about the market.

I am expecting Nifty to give 15-17 percent returns in the next one year. The main reason for this surge is healthy domestic inflows and I don’t see any reason why domestic inflows would reduce in coming months.

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Mutual funds have seen a huge demand with retail investors pumping money into the system. Besides, foreign flows would also continue to chase India considering its size and high growth compared to the rest of the emerging markets.

I see market continuing this momentum and scaling new heights next year.

Any top stocks which you think are under-owned but have tremendous potential to deliver strong returns in next 3-5 years?

As per our house view some stocks suggested are -- Century Plyboards, Tata Motors DVR, ICICI Prudential Life Insurance, Ujjivan Financial Services and CG Power.

It looks like the market has climbed wall of worries – earnings growth, muted macros and geopolitical concerns. What is your target for Nifty and Sensex for FY18?

I agree that markets have crossed all walls of worries even as we say prices are slaves of earnings and there have been some muted earnings in the last financial year. But I expect the next year to be much better in corporate earnings than this year.

I am sure the effect of demonetisation on the economy will fade out over the next year and even the positive aspects of GST will be clearly visible clearly in the earnings.

Overall, the market looks good for 2018 and I expect Nifty and Sensex to deliver around 15 to 17 percent growth in the coming year.

IPO mania has gripped D-Street with most primary offers getting oversubscribed multiple times. Do you see the trend continuing for Samvat 2074? What is the kind of money we are talking about?

We have seen a huge surge in IPOs in the last 12 months there has been active participation from retail investors in all the good quality IPOs.

I am confident that the same mania will continue for the next 12months as well. However, it also depends on the quality of the IPOs’, as we have seen good quality IPOs last year like D-mart, ICIC Lombard etc. hitting the market.

If we get good quality companies coming into the stock market and we have a fair valuation, investors would grab such opportunities and see oversubscriptions in these IPOs.

It will be difficult to put numbers on IPOs but with IPOs like NSE, SBI Life Insurance, Reliance AMC and others, the quality IPO pipeline looks good. The amount to be raised, I believe, would be almost equal to last year or may be higher.

What is your call on the broader market? The euphoria doesn’t seem to die down. Should investors keep accumulating or book profits?

Though markets look a bit stretched on the EPS front, the price to book still looks attractive. It is a phase of caution and one should focus on quality only.

Investors will get an opportunity to invest in specific stocks, so my advice to the investors will be look for good quality companies either in midcap small cap or large cap in invest for a long term.

The way domestic money is flowing into equity markets – do you think it is a cause of worry? Equities are high return but at the same time high-risk instruments. There is always a possibility of a negative return – will that dent optimism?

In the last one year, there is a huge inflow in the equity market. If you see September itself, we got a record of Rs 5,000 crore coming only into SIP in the equity market.

Even though I agree equity has a high return, it also has a high risk as well involved but the money coming as SIP is normally for a long-term and the kind of SIP amount month on month we are seeing has shown 46 percent growth as compared to last year.

It clearly means that the money is coming for long-term and if the money is coming for long-term then the flow will continue and I don’t think there is any reason to worry.

The only reason why it would reduce will be purely dependent on earnings of companies. Otherwise, I don’t see any problem in the domestic inflow of money because it is healthy and good money is coming from equity in the form of SIP.

What is the one thing or habit you want investors to start this Diwali with respect to trading or portfolio?

Investing in the stock market should be a long-term strategy. If any retail investor is looking to approach the stock market it should be through mutual fund SIP in the beginning.

The objective should be for long term and if they make a habit of regularly investing into market then it is statistically proofed over time and you negate the cyclical behaviour of market and you negate the rise and drops in the prices which may affect your portfolio or stocks.

One thing all investors should start from this Diwali is to invest one fixed amount in a month and make it a habit of investing rather than making it a one-time activity. Only if you have access to good research and advisory do invest directly, else SIP is the best.

Some analysts expect earnings to recover slightly in the September quarter. What are your views?

We expect some recovery in the September quarter, but significant recovery is likely in the quarters after and the next financial year.

Which sectors are likely to lead the next leg of the rally?

Our house research is overweight on NBFC, infrastructure, and metals.