Despite Urjit Patel’s exit and setback for BJP in election results of three Hindi heartland states, Nifty5o closed in the green at 10,549.15 on Tuesday. But, the index has wiped out almost all the gains it made through the year. On December 29, 2017, the index had closed at 10,530.
During the same period, many NSE stocks fell 20-60% from their 52-week highs. As many as 22 Nifty stocks are a part of that list, which includes Tata Motors, Yes Bank, Indiabulls Housing Finance, Vedanta, Sun Pharma, IOC, Tata Steel and JSW Steel.
The loss of power in three states — Madhya Pradesh, Rajasthan, and Chattisgarh — by BJP is a major event for investors to take note. Most experts feel that the journey from here on could turn volatile and the upside is likely to remain capped at 11,000 for Nifty.
Apart from political setback which could impact markets in the short term, the bigger worry will come from the global factors. In the US markets, more than half of S&P components are in a bear phase and most global investment banking firms are penciling a slower growth which could trigger a risk-off sentiment.
Foreign investors turned net sellers in December after pumping more than Rs 10,000 crore in Indian markets in November. A slow global growth environment will hurt growth for India Inc. as well which might not auger well for D-Street.
“Given, the present scenario where global economic growth is tapering, concerns on geo-political issues are on the rise, uncertain US trade policies, currency and crude oil volatility, inclusive corporate earnings growth trajectory yet to pick up; we expect 2019 to be no different from 2018, where markets may gyrate to extreme ends,” Dharmesh Kant, Head – Retail Research, IndiaNivesh Securities told Moneycontrol.
“Empirical evidence advocates bottom up approach for stock picking, which is the need of the hour. Companies that are driven by solid business models, asset-light balance sheet, high return ratios, and consistent earnings are the ones that would ride the storm,” he said.
Where investors should bet their money?
Investors will be better off not to touch high beta names until some clarity emerges with respect to General Elections 2019. But, till that time capital goods, IT, banking, agro are certain sectors which could hog the limelight.
"The Corporate banking space looks interesting, going ahead. The NPA cycle seems to have peaked out, the asset resolution bodes well, capex-cycle is slowly gathering pace, and the base for next year is very favourable. Apart from this, Pharmaceuticals and certain consumer-related stocks should do well," Prasanna Pathak, Fund Manager-Equity at Taurus Asset Management Co. Ltd. told Moneycontrol.
Kant feels that consumption space will outperform others, specifically FMCG, white goods, electrical & electronics, agro-chemicals, and select financials.
Sahil Kapoor, Chief Market Strategist, Edelweiss Investment Research, is of the view that pharma stocks could make a comeback in 2019 as current factors have led to extensive price damage.
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Source: Moneycontrol
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