Several PSU companies across sectors which have depleted investor wealth since the last couple of years are now beginning to look attractive as we move into 2019.
S Ranganathan
LKP Securities
We expect global equities to be volatile in 2019 on the back of US-China trade wars and a slowing world economy driven by likely political changes in emerging economies.
While balance sheet growth has remained subdued across emerging markets, currency vulnerability was seen in most economies as the cost of dollar liquidity rose.
The exit of Britain from the European Union should not do much harm to either side in 2019. Having said that, capacity constraints are likely to tighten in most advanced economies.
In India, while investors eagerly await corporate earnings to pick up in 2019, key monitorables like crude oil and infrastructure spending are likely to have a cushioning impact on our markets in 2019.
JAM trinity and plugging of leakages through DBT are yielding positive results. DeMo and GST have now begun to yield results in improving our Tax-GDP ratio.
The share of manufacturing sector towards the GDP has been around 16 percent for more than seven years. Mega-projects like PMAY, Bharatmala, and Sagarmala aimed at increasing this share and enhance investment rate from below 30 percent currently to over 32 percent look good in their stead.
Indian markets have shown resilience during the current financial year despite FPIs pulling out of equities worth a whopping Rs 50,000 crore till date during FY18-19. This clearly is a reflection of maturity among domestic investors and even among Tier-2 and Tier-3 cities in India where we have several HNI investors.
We continue to remain constructive on Indian equities even as several blue-chip corporates trade at not so cheap valuations. As a brokerage, we like corporate banks as well as retail banks and NBFCs for the coming days. While FMCG companies are priced to perfection we prefer large pharmaceutical companies and branded players across sectors post GST.
We also like pure commercial vehicle (CV) players and single source auto parts vendors to these CV players. Several PSU companies across sectors which have destroyed investor wealth since the last couple of years are now beginning to look attractive as we move into 2019.
Most importantly the overall breadth of our market is not reflective of the present buoyancy displayed at the index level which itself provides savvy investors with a plethora of investment opportunities in the small and midcap space.
(The author is Head of Research at LKP Securities.)
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