The long-term rally could stretch depending on the kind of budget which will be presented by the Government on Thursday.
The long-term rally could stretch depending on the kind of budget which will be presented by the Government on Thursday. The short-term corrections and fizzling out of rallies are a part and parcel of the stock markets and there could be one post the event as well.
The Nifty is already above the 11,000 mark after forming a strong support base around 10500-10600 levels during the month of January. We would look to buy on declines towards the mentioned support base and remain bullish until there is a substantial fall below the said levels.
We expect the government to focus on infrastructure and increase the spending in that segment to bolster building of proper roads, power generation, and boost irrigation. Some relief to the middle classed people in terms of relaxation of taxes would pep the sentiment to a whole new level.
Implementation of DBT, i.e. Direct Benefit Transfer for fertilizers could give a major boost to the sector which is looking ripe to extend gains. Increase in budgetary allocation to the infrastructure sector could shore up the capital goods space.
Other sectors which we will be eyeing would be Consumer Durables as a reduction in GST on household items will be a positive for this industry and also Logistics would benefit indirectly if spending on Infrastructure goes up.
However, with rumors going around for quite some time regarding taxing long-term capital gains from Equity investment can dampen the sentiment for the short term.
As mentioned earlier, the major sectors we expect to be in the limelight would be Infrastructure, Fertilizers, Consumer Durables and Logistics. Also, IT stock can surprise after being laggard for the last couple of years.
Although these stock has moved off late, we believe there is still upside in these stock if someone has 2-3 years preview. We recommend Jain irrigation, Mirza International, Natco Pharma, Tata Sponge, Visaka Industries among mid-cap; State Bank of India, Yes Bank, L&T, Reliance Industries, and Vedanta in the
We expect the index to continue rallying towards the 12000-12500 mark, with intermittent declines and sharp pullbacks. Earnings of major companies have been good till now with no major disappointments and with guidance from most corporate being bullish, achieving the above-mentioned target is very likely.
Secondly, this year’s Union Budget holds the key to get a first sense of how the year 2018 is likely to pan out. Having said that, we expect a reformist budget which will benefit the nation in the long-term this time around.
A populist budget, on the other hand, would point out at the short term intentions of the government, which would be concluded to appease people who were majorly affected by the demonetization and the introduction of the goods & services tax (GST).
This government has always put economics before politics ever since it has formed; hence we are bullish on the markets. We also intend to stick to our target of 12500-12500 until the no major shock comes from the global front.
As mentioned earlier, strong corporate earnings meeting street estimates and optimism pertaining to a few reforms which may be announced in the budget are adding fuel to this rally.
Also, the local liquidity in 2017 and begin of foreign capital during the Jan 2018 has fueled the rally in the market.
This above-mentioned statement in itself indicates room for upside from current levels. We reaffirm our bullish stance on the Equity markets in 2018 and likely to make fresh highs in dollar term.
Sticking to quality stocks from all the segments will offer a greater risk-to-reward as it is the quality of management, earnings and a boost from the government in terms of reforms matter the most.
Overall we believe, that largecaps would give better returns for the year 2018; However, stock specific mid-cap and smallcap stock can continue the momentum on the back of their fundamental performance.
Euphoric times don’t last long is something that everyone knows. Euphoria is usually known once there is a mismatch between Fundamentals and Technicals.
Technically, the markets are looking extremely strong and with the fundamental part of it going hand in hand with it in terms of good earnings, we are sure this is a bull market and in bull, markets declines are steeper and quick while moving higher takes just a little more time.
Having said one should remain cautious in increasing exposure after a strong rally in the last years and wait for the correction to enter these stocks.
If midcaps don’t correct from time to time and keep rallying, such a movement will not be justified and the concept of High Beta Stocks will be disregarded by most people.
Of course, there is a lot of liquidity, but till now whichever company has given out its numbers of the last quarter; most of them have been good. This negates the misconception that fundamentals might not support.
We would recommend him to stick to quality names with sound management and look for a minimum of 2-3 years and don’t expect to get the returns what market generated in 2017.
MORE WILL UPDATE SOON!!
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