"MERRY CHRISTMAS TO ALL OUR VIEWERS"--KEEP ROCKING

   

MUTUAL FUNDS COMING SOON THIS YEAR!!

Budget 2018: Union Budget likely to boost consumption sector; 3 stocks to benefit the most

In the upcoming Union Budget, the government is expected to focus on infrastructure and the rural sector. The prime objective is to generate employment in the rural sector by the implementation of various measures.

  

The theme of domestic consumption has become one of the biggest opportunities for India Inc. through various factors like favourable demography, increasing disposable household income and revival of consumption demand from rural India.

India is the youngest nation among major economies, with a median age of just 28 years. Moreover, 67 percent of the Indian population is in the age group of 15-64 years provides a large amount of labour force.

According to Economist Intelligence Unit (EIU), the working age population is estimated to expand by 1.4 percent per annum. over 2015-2020 to 93 crore by 2020. The discretionary consumption is poised to grow with such a huge working-age population.

The large working population (67 percent of total population) will drive median household income in India to USD 5,942 by 2020 from USD 4,571 in 2017 (EIU estimates). As a rub off, recovery in household spending will revive growth in the consumer sector. Household consumption expenditure is expected to rise to USD 2 trillion by 2020 from USD 1.4 trillion in 2017, according to EIU.

The rural demand will witness an upward trajectory after three years of slow growth supported by two consecutive good monsoons.

Moreover, rural wages are also reviving – in September 2017 the nominal rural wages were up 7.1 percent year-on-year and real rural wages rose by 4.5 percent year-on-year (YoY).

In addition, in order to double the farm income by 2022, the government has allocated Rs 1.07 lakh crore for expenditure on rural development, out of which Rs 48,000 crore is allocated to MNREGA for FY2017-18.

In the upcoming Union Budget, the government is expected to focus on infrastructure and the rural sector. The prime objective is to generate employment in the rural sector by the implementation of various measures.

The Modi government has been under pressure from its political opposition as well as the public to create jobs, as a painful demonetisation drive and the new goods and services tax (GST) have virtually crippled the informal sector of the economy, wiping out millions of low-skill jobs.

The Finance Ministry and Commerce Ministry are actively looking at ways to boost exports in a bid to narrow the trade deficit. The exporting sectors are key job creators in the economy.

The government has been also focusing on agricultural subsidies to increase productivity and yields from cultivation. The central government launched the direct benefit transfer (DBT) for fertilisers in various states in the month of October 2017.

This ensures that there is no extra burden on farmers as they will continue to get fertilisers at a subsidised rate. Such measures would increase the disposable income in rural India and drive the consumption pattern in India.

The Finance Minister is likely to announce policies and programs beneficial for the rural economy.

Stocks to Watch:

Some of the stocks that are likely to benefit from the consumption-oriented landscape and likely consumption sector friendly sops in the Budget are Hatsun Agro, Jyothy Laboratories, and Varun Beverages.

Hatsun is a leading organised Indian dairy player with a dominant position in South, expanding to Maharashtra and Odisha. Jyothy Laboratories is an FMCG company predominantly present in fabric care and dish wash categories. Varun Beverages is the second largest franchisee of PepsiCo in the world (ex-USA), contributing around 47 percent of PepsiCo India’s volume.

MORE WILL UPDATE SOON!!

Top 11 stocks from $10 billion club which rose over 30-80% in 2017; do you own any?

Majority of the big boys on D-Street gave returns which were higher than benchmark index return for the year 2017 which will keep the interest alive of investors with respect to large caps going forward.

   

It has been a stellar year for the bulls as benchmark indices surpassed crucial resistance levels to hit fresh record highs in the year 2017. The S&P BSE Sensex came within a kissing distance of Mount 34K while the Nifty50 surpassed 10,500 levels.

Consumer durables, metals, auto, finance, oil & gas were the key sectors which did well in the year 2017. The bluechips of the bluechips also did not disappoint investors. They might not have given multibagger returns but stocks with a market cap of over USD 10 billion in the year 2016 and 2017 have given double-digit returns of up to 84 percent.

For reference, we have taken rupee value at 67/USD towards the close of 2016 and Rs 64/USD for the year 2017 for calculating market capitalisation.

Out of 29 stocks, 11 stocks rose in the range of 30-84 percent which includes names like M&M, UltraTech Cements, ICICI Bank, L&T, HDFC Bank, Kotak Mahindra Bank, Bharti Airtel, Maruti Suzuki Ltd etc. among others.

But, as many as 5 out of 29 stocks which belong to the USD 10 billion club gave a negative return which includes names like Sun Pharma, Tata Motors, Coal India, ONGC, as well as Infosys.

Indian equity markets witnessed a historic day on Friday when the total market valuation of all listed companies on BSE touched a record high of over Rs 150 lakh crore helped by strong gains in the broader market.

The 30-share index Sensex ended with a gain of 184.02 points, or 0.55 percent, at 33,940.30 on Friday. The market capitalisation of BSE-listed companies surged to Rs 1,50,67,285 crore (USD 2.35 trillion) from Rs 1,49,98,415.29 crore on Thursday, a gain of Rs 68,869.71 crore.

The total market valuation of all listed firms on BSE had hit Rs 100 lakh crore level on November 28, 2014.

Majority of the big boys on D-Street gave returns which were higher than benchmark index return for the year 2017 which will keep the interest alive of investors with respect to largecaps going forward.

With valuations touching sky high especially with respect to midcaps most analysts advise investors to trust largecaps in the year 2018 – because there is a huge margin of safety as compared to mid or smallcaps.

“We recommend largecaps because there is a huge margin of safety in largecaps. We know that earnings have been muted for years on end now that you have a lot of margin of safety in largecaps,” S Naren, ED & CIO of ICICI Prudential AMC said in an interview with CNBC-TV18.

“But, if you ask me, do midcaps look cheap, the answer is no, they look very costly relative to largecaps. But, just like this bull run can go further, you have a situation where largecaps have a margin of safety but lower returns. So it is much wiser for a mutual fund to push largecaps than to push mid and smallcaps now,” he said.

Here’s what other global brokerages are recommending:

Maruti Suzuki: Target Rs10,563

Earlier in the month, Morgan Stanley maintained its overweight stance on Maruti Suzuki but raised its 12-month target price to Rs10,563 from Rs9102 earlier. The bull case of the stock is above Rs14000 levels.

Bharti Airtel: Target Rs600

The domestic brokerage firm, Sharekhan upgraded the stock in the month of December to buy from hold earlier with a target price of Rs600. Sharekhan expects a favourable competitive environment and lesser predatory pricing action (Jio expected to turn cash positive before the IPO to get better price discovery).

Reliance Industries: Target Rs970

Sharekhan maintains a buy rating on RIL with a target price of Rs970. The domestic brokerage firm expects EBITDA/PAT CAGR of 24%/15% over FY2017-FY2019E, driven by the commissioning of core downstream projects in FY2018.

Disclosure: Reliance Industries, which owns Reliance Jio, also owns Network18, which publishes Moneycontrol.com.

HUL: Target Rs1402

Macquarie maintains an outperform rating on HUL with a target price of Rs1402. The global investment bank is building in 250bps of margin expansion in the next three years (FY17-20E),

Which could drive an earnings CAGR of 18 percent in FY17-20E. HUL is also Macquarie’s top pick in the India Consumer sector and a Macquarie Marquee recommended the stock.

HDFC Bank: Target Rs2100

Sharekhan maintains a buy rating on HDFC Bank with a target price of Rs2100. HDFC Bank is well poised to tap the growth opportunities due to strong capital ratios, healthy asset quality and a steady revival in consumer spending

Kotak Mahindra Bank: Target Rs1200

IIFL maintains a buy recommendation on Kotak Mahindra Bank with a target price of Rs1200. IIFL expects the group to deliver 25 percent CAGR in earnings over FY17-2020.

HDFC Ltd: Target Rs1900

Sharekhan maintains a buy recommendation on HDFC Ltd with a target price of Rs1900. The premium valuation of HDFC is justified not only because of its conservative policies and market leadership but also due to high earnings visibility and best-in-class operating metrics.

L&T Ltd: Target Rs1440

Motilal Oswal maintains a buy recommendation with a target price of Rs1440. L&T enjoys several levers across its business/geographical segments. It has emerged as the E&C partner of choice in India, which provides a robust foundation to capitalize on the next leg of the investment cycle.

ICICI Bank Ltd: Target Rs365

Prabhudas Lilladher maintains a buy recommendation on ICICI Bank with a target price of Rs 365. Management expects the overall loan growth to improve led by domestic especially retail & better corporates.

UltraTech Cement: Target Rs4500

Prabhudas Lilladher maintains a buy rating on UltraTech Cements with a target price of Rs4500.

M&M Ltd: Target Rs815

ICICIdirect maintains a buy recommendations on M&M with a target price of Rs 815. M&M is one of the cheapest large cap companies available in the auto universe. An improved performance of the auto segment along with the sustained performance of the tractor segment will aid the company to narrow the valuation gap.

MORE WILL UPDATE SOON!!

Budget 2018: 5 midcaps on radar as govt focuses on easing pain in farm and rural sector

Rise in domestic and global liquidity led to P/E re-rating in the market. Do you think the story will reverse in 2018 or will the rally continue? What is the Nifty target for next year?

   

The rally has been largely driven by expansion in P/E multiples with earnings growth faltering due to adverse impact of demonetistion and implementation of GST. Going ahead, we see limited scope for multiple expansion from here and the baton to take markets ahead would have to be passed on to earnings growth in 2018.

Consequently, we expect the benchmark indices to largely move in line with expected growth of 12-15 percent in earnings of index companies in the next fiscal.

What will be the big drivers for Indian markets in 2018?

In addition to continued strong domestic inflows in financial assets (including equities), we believe that improving growth of global economy (aided by expected uptick in US economy) would boost global trade and improve fortunes of export-focused businesses in general. Second, the clean-up and recapitalisation of public sector banks and its positive impact on overall earnings growth would be among the key drivers of equities in 2018.

How important are the recent state election results ahead of the general elections in 2019?

State elections have gained more importance lately as it provides an indication of the mood of the voters post the bold reforms undertaken by the government that has impacted the lives of the common man.

Though the intentions are right and the voters understand it in general, market participants will keenly watch if it will give the opposition a fair chance to stage a strong comeback.

Any unfavourable verdict could impact the government’s ability to take tough policy decisions during the remainder of its term in office.

As we are near the year-end and no major events are lined up, the next key events are earnings and the Budget. What are your expectations from the last full-fledged budget of the Modi government?

One does not expect any bold policy measures in the next Budget. Given the nascent stage of recovery from the twin effect of demonetisation and GST, the government focus would be on easing the pain in the farming and rural sector and continue with public spending on infra development to support the economy.

Anyway, post GST, a large part of the decision on indirect taxation need not be taken in the Union Budget now.

Midcaps outperformed the Sensex in 2017. Do you think will it continue to outperform in 2018?

Midcaps are a very broad space and there always would be money-making opportunities in the midcap segment. Rather than focusing on midcap index, the approach should be to focus on sustainable growth stories within the midcap space.

Apart from crude, what are the biggest risks for the Indian markets in 2018?

Cheap money globally is fueling an unsustainable rally in several assets. Bitcoin is a case in point. Such bubbles tend to grow big enough to impact other asset classes in case of a burst or accidents.

In India, a lot of hope is pinned on fast recovery in the economy and revival of earnings growth over the next few quarters. Any negative surprises on these two fronts could seriously impact the markets.

As we move to 2018, what are your five best multibagger ideas for 2018?

Rather than dabble in unknown, high risk smallcap stocks in search of exponential returns, we see growing maturity among investors to look for investment themes with multi-year growth outlook.

Three such trends are: Financialisation (shift of household savings to financial assets from physical assets), Formalisation (market share gains by organised players in fragmented industries as the unorganised players lose the advantage of nonpayment of taxes) and rural consumption (driven by the government focus to double farm income).

Based on these investment themes we like following companies: Bajaj Finserv, Parag Milk, Varun Beverages, Jubilant Foodworks and PNB Housing.

Market Week Ahead: F&O expiry, FIIs in vacation mode among 10 things to track

After big gains, the rally might continue in the coming truncated week but largely there could be volatility and range bound trade.

 

The week gone by was great for the market as not only equity benchmarks, but also broader markets ended at fresh record closing highs, driven by technology, metals, auto, FMCG and PSU banks stocks. The BJP's victories in the Gujarat and Himachal Pradesh Assembly elections lifted sentiment. Global cues also lent support after the US passed a bill that slashes the corporate tax rate in the country to 21 percent from 35 percent.

Benchmark indices added more than 3 percent gains in three consecutive weeks while for the passing week, the 30-share BSE Sensex gained 1.4 percent; and the 50-share NSE Nifty rallied 1.55 percent to close a tad below the psychological 10,500-mark ahead of expiry of December futures & options contracts next week. The index hit an intraday record high of 10,501.10 on Friday.

Short covering could be one reason for rally as the rupee has been rangebound around 64-64.50 against the US dollar during the month despite FII selling, and rising bond yields and crude oil prices.

The broader markets outperformed frontline indices, with the Nifty Midcap index surged 4.4 percent and BSE Smallcap gained 4.5 percent. On the other side, the volatility has also gradually been reduced especially after the Gujarat elections, with India VIX falling to 11.5875 from 16.4075 in previous week.

One reason for consolidation would be the December F&O expiry on Thursday and second would be the low volumes expected at FIIs desk and lack of cues due to Christmas holidays.

Experts expect stock-specific action to continue.

Overall, 2017 is expected to end with around 28 percent gains on the Nifty, though there could be consolidation in the last week of the year.

Amar Ambani of IIFL Private Wealth feels with FIIs now in vacation mode, subdued index action is likely and the focus on broader markets is expected to stay.

The momentum that has been built up following Gujarat Elections has been complemented by global factors as well. So, the momentum is expected to continue. However, for the Nifty to move above 10,700 and 10,800, it will need support of strong earnings growth as well as GDP growth.

Indian and global markets will remain shut on Monday for Christmas.

Here are 10 things to watch out for in the coming truncated week:-

F&O Expiry

The Nifty futures and options contracts will expire on Thursday and trading positions will be rolled over to January the series.

On Friday, Maximum Put open interest was seen at 10,000 strike followed by 10,400 while maximum Call OI was at 10,500 strike followed by 10,600 strike.

Fresh Put writing was seen at 10,400, 10,450 and 10,500 strikes while fresh Call writing was seen at 10,550 and 10,650 strikes.

As volatility is largely expected in the coming week, the 10,400 levels on the Nifty could be key to watch out for and the expiry is likely around 10,400-10,500 levels.

"The Nifty 50 is expected to consolidate above 10,400 in the coming week. Eventually, it should be able to move towards 10,600.

Shift in Put writing, as well as Call writing to a higher strike, suggests shifting of the support. Option band signifies a broader trading band between the range of 10,400 to 10,600 for next coming sessions.

Winter Session of Parliament

The ongoing winter session of Parliament will be important to watch out for. The Rajya Sabha has been in a deadlock since the beginning of session as the Congress is demanding that Narendra Modi apologise for allegedly insulting his predecessor Manmohan Singh during the Gujarat election campaign. So all eyes will be on how the government is able to pass the important Bills listed on its agenda.

The Goods & Services Tax (Compensation to States) Ordinance, 2017, Insolvency & Bankruptcy Code (Amendment) Ordinance, 2017, Indian Forest (Amendment) Ordinance, 2017, Motor Vehicles (Amendment) Bill, 2016, and Muslim Women (Protection of Rights on Marriage) Bill, and Prevention of Corruption (Amendment) Bill, 2013 are some of the important bills expected to be taken up.

Auto Sector

Auto stocks will remain in focus in the coming week, especially on Friday ahead of December sales data due on January 1.

Sales data have been good so far and there was no disruption due to GST rollout.

The Nifty Auto index rallied more than 30 percent in 2017 and gained over 4 percent in the passing week.

Oil Sector

Oil stocks will be in focus on Tuesday as crude oil prices are near their highest levels since 2015 after comments from Saudi Arabia and Russia stating that any exit from crude output cuts would be gradual.

Oil marketing companies (HPCL, BPCL and IOC) might be under selling pressure but oil exploration firms (ONGC and Oil India) may strengthen further.

ONGC rallied 3 percent on Friday following an increase in crude oil prices. Brent crude oil futures ended above USD 65 a barrel last week.

If crude oil rises further from here on then that will have major impact on fiscal deficit and economic growth as India imports around 80 percent of oil requirement.

Macro Data

On Friday, infrastructure output data for November (which was at 4.7 percent in October) and foreign debt for Q3 (USD 485.8 billion in previous quarter) will be released.

Foreign Exchange Reserves for the week ended December 22 (which was at USD 401.39 billion in the previous week) will also be announced on Friday.

Technical Outlook

The Nifty50 formed a robust bull candle after two bearish candles which is a bullish sign, experts said. Investors should remain long with a stop loss below 10,426 levels, they advised.

"The near term trend of Nifty is positive as per smaller and larger timeframe (like daily and weekly) and more upside could be expected in the next couple of weeks. However, due to year end, there is possibility of gradual up move amidst range bound action for next week," Nagaraj Shetti, Technical Research Analyst of HDFC Securities said.

Mitessh Thakkar of mitesshthakkar.com said the hope is that on Tuesday the market is expected to open with a gap-up and continue with the momentum. If that happens, then 10,700-10,750 should be immediate targets.

"However, if there is a gap-down then we will back to the range of 10,400-10,500, which might last for 1-2 sessions," he added.

FIIs and DIIs Flow

The money flow from foreign institutional investors could be slowed down in the coming week as FIIs generally go on leave during the last week of the year because of the Christmas holidays. However, domestic inflow is expected to continue.

"The market optimism is expected to continue due to expectation of NAV-based buying till December end," said Anita Gandhi, Whole Time Director at Arihant Capital Markets.

Domestic institutional investors were net buyers to the tune of around Rs 3,500 crore in the passing week while FIIs have net sold nearly Rs 3,000 crore worth of shares.

Stocks in Focus

Prakash Industries may react to the news that SEBI has revoked its order regarding suspected shell companies.

Corporation Bank will also be in focus as its board of directors has approved additional fund raising of Rs 300 crore in one or more tranches with greenshoe option.

EID Parry may react positively as the board has approved sale of its bio pesticides business as a going concern by the way of slump sale to Coromandel International for Rs 303 crore. It also approved sale of entire stake in Parry America Inc for Rs 35.4 crore.

Reliance Communications will be in focus as a media report indicated that Reliance Jio emerged as highest bidder for the company's assets.

(Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.)

Global Cues

The minutes of the Bank of Japan monetary policy meeting will be released on Tuesday. On Thursday, Japan's industrial production data for November and US initial jobless claims for the week ended December 22 will be announced.

MORE WILL UPDATE SOON!!