Nifty and Sensex would continue to flirt around their respective milestone but a decisive up move is unlikely. Traders should maintain stock specific trading and investment approach hereon says Jayant Manglik of Religare Broking
In the near term, we feel both, Nifty and Sensex, would continue to flirt around their respective milestone but a decisive up move is unlikely, and traders should maintain stock-specific trading and investment approach from here on, Jayant Manglik, President - Retail Distribution, Religare Broking Ltd, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpts:
Q: Last week Sensex hit 40,000 and Nifty climbed 12000. Can we say that indices have made an intermediate top at these levels?
A: In the near term, we feel both, Nifty and Sensex, would continue to flirt around their respective milestone but a decisive up move is unlikely. Traders should maintain a stock-specific trading and investment approach hereon.
Q: Both Small & Midcaps witnessed a golden cross on their charts this week. Do you think uptrend is likely to continue?
A: NDA's thumping victory with a clear majority for the second straight term is certainly encouraging news for the Indian markets. Such a strong mandate would allow the government to continue focusing on its policies and reforms, take steps to improve the fiscal situation and revive economic growth.
While in the near term, corporate earnings, uncertain global scenario, and peak valuations could exhibit some volatility and correction, the long-term outlook continues to remain stable for the Indian markets.
Given 2-3 year investment horizon, mid and smallcap counters with a low valuation, improving earnings prospects, prudent management and healthy balance sheet can be considered for investment.
Further, while Nifty continues to trade near peak valuations, many quality largecap companies have underperformed and are still attractively valued with good prospects. Investment can be considered in those companies as well.
Q: Despite benchmark indices have hit a record high, there are only around 50 names that have hit 52-week highs on the BSE. This is not a sign of a strong bull market. What are your views?
A: The broader indices have been underperforming the benchmarks for almost one and half year thus we’re seeing only a handful of stocks making 52-week highs.
But, we feel that the scenario would gradually change as indications are now in the favour of a rebound in mid and smallcap pack.
Q: What are your expectations from markets in the first 100 days of PM Modi's second stint? Historical data suggests Sensex gave positive returns after three out of four recent election verdicts. Do you see a similar trend?
A: 2014 (Sensex rose 8.2 percent), 2009 (Sensex rose 5.2 percent), 2004 (Sensex fell 5.4 percent), and in 1999 (Sensex rose 39 percent).
While some gains cannot be ruled out in the near term, we expect this excitement of NDA victory to be short-lived and focus should shift back to fundamentals over medium to long term.
Notably, at current levels, the Indian markets are trading near peak valuations and at a significant premium to other emerging markets.
This warrants some caution as correction cannot be ruled out in the event of a further downgrade in corporate earnings, deterioration in macros and global uncertainty.
Hence, unlike before, wherein the Sensex gave positive returns in three out of four election verdicts, the situation could be different this time around.
Q: What are your top five picks that witnessed a breakout recently and are ripe for cherry picking?
A: We remain constructive on long-term growth prospects of Dabur, Godrej Consumer, Maruti, Cummins India and Indraprastha Gas.
With high volatility expected in the coming weeks, we feel these companies are relatively safe investment picks and offer healthy upside potential in the coming months.
The Ayurvedic segment in India is expected to grow at around 16 percent CAGR over 2016-2021. Dabur, a leading Ayurveda and natural product maker company in India, is well placed to capitalise the opportunities on the back of increasing consumer demand, innovating new products across categories and expanding its geographical footprints.
Going forward, the company’s strategy would remain to invest strongly behind its power brands, increase advertisements on digital platforms and focus on product innovation across categories, which would enable it further strengthen its brand equity and market share.
While GCPL’s financial performance over the last three quarters has been subdued, we expect the volume taking off in domestic business to improve, led by an anticipated revival in demand and company’s efforts towards brand building and product innovation.
Further, with new launches and effective marketing initiatives, the growth trajectory could gradually improve in overseas business. The recent correction in the stock price has given a good entry opportunity to long term investors.
From long term perspective, we maintain our positive view on Maruti considering the easing of macro headwinds (currency) and the company’s leadership position in the passenger vehicle segment and continued strength witnessed in rural markets.
Further, lower interest rates augur well for the passenger vehicle industry given its high finance penetration levels. The recent muted financial performance has largely been factored in the stock price and the valuations look attractive at current levels.
Cummins is a leading manufacturer of engines and other power generation products. The company has reported strong growth in the domestic market in recent quarters.
Further, a pick-up in demand in all infrastructure segments (construction, water well), increasing penetration in rail as well as marine and high demand from data centres will drive the growth in the domestic market.
Further, investments in product enhancements (e.g. new power train solutions) and strengthening market share are the key growth triggers. On the profitability front, stability in commodity prices, as well as value engineering/value-added products, shall lead to an improvement in margins.
We expect IGL’s revenue and PAT to grow at a healthy pace, led by network expansion, increasing conversion to CNG and economic benefits of CNG/PNG vs auto fuels.
IGL also stands to benefit from an increase in the award of geographical areas for gas distribution and extension of market exclusivity for city gas distributors.
Further, the recent allocation of distribution licenses in three areas in 10th bidding round to IGL would also aid future growth.
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