Expect boom in rural demand ahead of elections, consumer space to see growth: Raamdeo Agrawal

The market opened at record highs on Monday with the Sensex hitting 38,643.57 and Nifty at 11,671 for the first time, backed by positive global cues and driven by index heavyweights Reliance Industries, ITC and banks stocks.

In fact the Nifty has gained nearly 11 percent in 2018 on top of over 28 percent rally in the previous year and has surged more than 16 percent from 2018-lows seen in March.

Reasons for the up move are many but the key factor is in line to better-than-expected earnings for June quarter while others were stability in rupee and crude oil prices, positive global cues and easing trade war tensions for the time being.

"Earnings is always the foundation of market but apart from that, other factors are liquidity, fund flow, political situation, world economy and the US economy," Raamdeo Agrawal, Co-Founder of Motilal Oswal Financial Services told CNBC-TV18.

While talking on risk, he said there is always some risk to the market and 5-10 percent correction is always healthy. "So the answer to question of should you focus on risk or should you focus on record high is depend on the person?."

He believes currently there is no bubble in terms of earnings. "Generally when earnings growth move into triple digits then one has to be cautious. For e.g. Infosys had triple digit earnings in 1999, 2000, 2001."

PSU Banks

PSU banks had been facing a risk related to rising provisioning but Q1 earnings and commentary indicated that NPA cycle seems to bottoming out in FY19.

Any performance of the company is always depend upon its management and the same is the case with PSU banking space, Agrawal said, adding opportunities in banking space are unprecendent considering 7 percent plus growth in economy.

In fact, PSU banks have amazing franchisee model, pan India network, brances but we need drastic change or turnaround in the space as values are moving from PSU to private banks, he said.

Global Risk

Agrawal said economists have been saying about unwinding of quantitative easing but when they start tightening this rope, what will break down - whether it is commodities or emerging markets - is the question?

MF flow

Monthly mutual fund flows have been moderating to around Rs 10,000 crore for couple of months compared to average of Rs 21,000 crore from last year, but experts feel that is still good and keep supporting the market.

Agrawal expects the flow will pick up going ahead. "For e.g. there has been lull in IPO market in 2018 compared to strong 2017 but will not last for long. As the time passes, everthing would pick up."

Midcaps