Mood of the Nation survey: Key takeaways

If the polls were to be held today, BJP’s vote share would come down to 35 percent, UPA could get 12 percent votes while other parties (including SP and Mayawati-led Bahujan Samaj Party) would together account for 46 percent.

  

With the 2019 Lok Sabha elections less than a year away, both BJP and the Congress have sounded the poll bugle and are leaving no stone unturned.

Prime Minister Narendra Modi continues to lead the saffron party from the front while Congress President Rahul Gandhi has announced his prime ministerial ambitions.

According to the Lokniti-CSDS-ABP News ‘Mood of the Nation Survey’ (round three) released on Thursday, the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government is likely to return to power if the polls are held today, however, with a wafer-thin margin.

The BJP would not get a majority on its own and will have to depend on its allies to retain power, the survey suggests.

Here are some of the key takeaways from the ‘Mood of the Nation’ survey:

BJP may not get majority on its own

The survey suggests that if the elections were to be held today, the BJP would not be achieve the 272-seat magic number. It would have to rely on its allies to retain power at the Centre.

NDA would get 274 seats while the UPA would win 164 seats. Other parties and regional parties would get 105 seats, the survey has suggested.

In terms of the nationwide vote share, NDA would get 37 percent votes, down from 38.5 percent in 2014. UPA would get 31 percent votes, up from 23 percent, while others would get 32 percent votes.

BJP makes loses in Uttar Pradesh

Out of the 80 Lok Sabha seats in the state — the highest for any state in the country — the saffron party had bagged 71 seats. Akhilesh Yadav-led Samajwadi Party (SP) had won five seats while Congress and Apna Dal (NDA member) bagged two seats each.

NDA’s vote share in 2014 in UP was 43 percent while UPA’s vote share was eight percent. Other parties put together, had received 49 percent votes.

However, if the polls were to be held today, BJP’s vote share would come down to 35 percent, UPA could get 12 percent votes while other parties (including SP and Mayawati-led Bahujan Samaj Party) would together account for 46 percent.

BJP’s performance dips in southern India

Out of 132 seats in southern India, the NDA is likely to win just 18-22 seats while the UPA could bag 67-75 seats, according to the survey. Other players and region parties could win 38-44 seats, if the polls were to be held today.

In 2014, NDA had bagged 2 seats in the region, UPA had won 21 seats while other parties had clinched 88 seats.

BJP makes gains in Bihar, Eastern India

The survey has revealed that the NDA would maintain its numbers in the state of Bihar. The NDA is likely to have a 60 percent vote share, far ahead of UPA’s 34 percent. Other parties would have a six percent vote share, if the polls were held today.

In 2014, NDA had a vote share of 58 percent followed by UPA’s 28 percent. Others had bagged a vote share of 21 percent in the previous general election.

In July 2017, Nitish Kumar, Chief Minister of Bihar, resigned from his post and broke his party's 'Grand Alliance' with Lalu Prasad Yadav's Rashtriya Janata Dal (RJD) and Congress.

Nitish was sworn in as the new Chief Minister less than 24 hours after he resigned, but this time with the support of the BJP.

The survey has also suggested that the NDA’s popularity has remained intact in the east. If Lok Sabha polls were to be held today, NDA is likely to get 86-94 seats out of 142 seats. The UPA would get 22-26 seats while others parties would bag 26-30 seats.

In 2014, NDA had won clinched 58 seats in the region, UPA had won 21 while others bagged 63. East India here includes Bihar, West Bengal, Odisha, Jharkhand and Assam.

In West Bengal, chief minister Mamata Banerjee-led Trinamool Congress is expected to hold onto the state if polls were held today. TMC is likely to get 44 percent vote share, followed by BJP’s 24 percent, Left parties’ 17 percent and Congress’ 11 percent.

Congress leads in Rajasthan, MP with clear margin

If the Assembly elections in the states of Rajasthan and Madhya Pradesh were to be held today, the Congress party could trump the BJP in both states.

The BJP is lagging behind in Rajasthan by a 5 percent vote share. Congress is likely to bag 44 percent vote share, followed by BJP’s 39 percent, according to the survey.

In Madhya Pradesh too, where Chief Minister Shivraj Singh Chauhan is fighting the anti-incumbency factor, the Congress is maintaining a comfortable margin of 15 percent vote share over the BJP.

Congress is likely to get a 49 percent vote share while the BJP could come second with 34 percent votes, if elections were to happen today.

Rahul Gandhi’s popularity rises, PM Modi’s dips

Around 24 percent of the people who were surveyed preferred Congress president Rahul Gandhi as the prime minister. PM Modi however, retained his lead being the preference of 34 percent of the respondents.

The popularity gap between the two leaders has come down to 10 percent from what was 17 percent five months ago, according to the second round of the survey.

According to the survey, almost 47 percent of the total 15,859 respondents are of the opinion that the Modi government does not deserve to be voted back to power in 2019. Less than two of every five respondents or 39 percent people thought it deserved a second chance, with the rest remained non-committal.

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Technical View: Nifty 50 forms a bullish candle; 10,524 crucial for bulls in the coming week

India VIX fell down up by 4.46 percent at 12.55 levels. On the options front, maximum Put OI is intact at 10,500 followed by 10,400 strikes while maximum Call OI is placed at 10,800 followed by 11,000 strikes.

  

Bulls charged on D-Street from the word go as they helped Nifty50 to climb 10,550 as well as 10,600 levels on closing basis. The index which made a bullish candle on the daily charts formed a Hammer-like pattern (not exact) on the weekly charts.

The Nifty50 is now trading above its crucial short-term moving averages and today’s intraday low of 10,524 will be of big importance in the coming week, suggest experts. A break below this level could again put further pressure on the index amid expiry week volatility.

On the upside, the next target for the index is placed at 10,733 levels but bulls will be able to take full control of the index if it surpasses 10,929 which was recorded on May 15, 2018.

The Nifty50 which opened at 10,533 slipped marginally to hit an intraday low of 10,524. Bulls took control of the index and pushed Nifty above 10,600 to hit an intraday high of 10,628 before closing the day at 10,605, up 91 points.

It was heartening to see bullish Hammer formation on weekly charts as markets recouped 100 percent of the losses witnessed in the first three sessions of the week with back to back strong bullish candles of last two sessions. This V-shaped recovery on an accelerated path, after hitting a low of 10,417, is raising hopes of a bottom around 10,417 levels.

Though, it will be too early to conclude that bottom is in place at recent low but the same will be confirmed if Nifty50 get past 10,929 by next 4 sessions which also coincides with current month expiry.

Mohammad further added that traders are advised to take a cautious stance if Nifty slips below 10,524 levels in next 2 sessions. On oscillators front, MACD shied away with an uptick from its equilibrium line on daily charts and this kind of behaviour is usually regarded as a strong bullish sign. The current upmove can initially expect to get extended up to 10,733 levels.

India VIX fell down up by 4.46 percent at 12.55 levels. On the options front, maximum Put OI is intact at 10,500 followed by 10,400 strikes while maximum Call OI is placed at 10,800 followed by 11,000 strikes.

Meaningful Put writing is placed at 10,600 and 10,500 strikes which could act as a strong support while Call unwinding is seen at immediate strike prices which give room for further upside.

Options data suggests a shift in a trading range between 10,500 and 10,700 zones. The Nifty index opened flattish and witnessed sustained buying throughout the trading session. It formed a Big Bullish Candle on daily scale followed by Dragon Fly Doji on a weekly scale which suggests buying is visible at lower levels in the market.

Now, till it holds above 10,550, it could extend its gains towards 10,680 and then towards 10,725 zones, while on the downside supports are seen at 10,550 and then towards 10,500 levels.

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Sun Pharma Q4 profit up 7% YoY at Rs 1,309 crore, beats estimates

Revenues declined 1.11 percent to Rs 7279.9 crore in Q4 on YoY basis but came above analyst estimate of Rs 6,778.8 crore.

  

India’s largest drugmaker Sun Pharmaceutical's consolidated net profit rose 6.94 percent year-on-year (YoY) to Rs 1,309 crore in the fourth quarter ended March, beating analysts' estimates.

Consolidated revenue for the quarter declined 1.11 percent YoY to Rs 7,279.9  crore in Q4 but was above analyst estimate of Rs 6,778.8 crore.

Consolidated EBITDA margin stood at 24.1 percent in Q4FY18.

A Reuters poll had forecast a drop in net profit to Rs 947.4 crore. It estimated a revenue decline of 0.68 percent YoY to 6,778.8 crore.

The company declared a dividend of Rs 2 per equity share of Re 1.

The results were announced after market hours.

Shares of Sun Pharma rose 0.97 percent to close at Rs 466.55 on BSE, the benchmark Sensex gained 0.78 percent to 34,924.87 points.

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These 38 multibaggers stocks rose up to 600% in 4 years; do you own any?

Since 2014, midcaps have faced three large round of corrections in January 2016, November 2016 and May 2017. In the current round, midcaps have already retraced 14 percent from the top, puncturing the bull cycle.

Midcap stocks surged in 2014 after Prime Minister Narendra Modi assumed office on hopes of pro-growth reforms and a strong bounce back in economic growth.

As many as 38 companies have returned 100-600 percent in the last four years. These include: Dalmia Bharat, IIFL Holdings, Natco Pharma, NBCC, TVS Motor Company, Page Industries, Biocon, Ashok Leyland, Rajesh Exports, and 3M India.

But if you joined the rally late, there are chances that your portfolio might still be bleeding. The BSE Midcap index, which nearly doubled since 2014, came under pressure in the last five-months, weighed down by falling rupee versus the dollar, sharp selling by foreign institutional investors (FIIs) and market regulator Sebi’s reclassification of mutual fund schemes.

In October last year, the regulator issued a circular directing mutual funds to group their equity schemes under large, mid and smallcap categories based on the market capitalisation of stocks the scheme have invested in.

Sebi’s reclassification is aimed at simplifying the life of a mutual fund investor by rationalising the number of schemes available in the market and also re-categorising the same. The will enable the investor to differentiate between schemes as per his/her goals and risk appetite, with relative ease and without much confusion.

“The reason why Sebi reclassification is leading to a sell-off in midcaps and smallcaps is because many largecap funds had a proportionately greater exposure to these with the aim of outperforming the benchmark index: 

  

If we look at the losers, there are stocks that have lost up to 90 percent of their value in the last four years. As many as 21 stocks in the BSE Midcap index posted negative returns since the Modi government came to power in 2014. These include: Reliance Communications (down 90 percent), Bank of India (down 70 percent), Adani Power (down 65 percent) and Reliance Power (down 65 percent).

What should investors do with these midcaps?

Since 2014, midcaps have faced three large round of corrections in January 2016, November 2016 and May 2017. In the current round, midcaps have already retraced 14 percent from the top, puncturing the bull cycle.

Despite India’s macro story taking a hit due to falling rupee against the dollar and higher crude oil prices there is a higher likelihood of bottom-fishing happening in the short-term. Hence, experts advise investors to be cautious while picking stocks.

It is imperative that an investor re-assesses the portfolio at periodic intervals to weed out stocks which do not fit various fundamental criteria. While a considerable premium valuation may warrant at least a partial profit-booking in the stock, the mere fact that it has been a multi-bagger is not the most appropriate argument to exit a stock.

Investors concerned about rich valuations can focus on companies in the largecap domain or stocks that turned largecap, experts said.

Midcaps are still trading at premium valuations as compared to largecaps. If investors are not ready to hold the stock for 3-4 years, then they should exit from the winners which have given multi-bagger returns.

She lists Tata Consultancy Services (TCS), Yes Bank, Bajaj Finance and Bajaj Finserve as some of the stocks which have grown from midcaps to largecaps over a period of time. These stocks continue to perform and have delivered multibagger returns to clients.

From the above table, she recommends quality stocks like Jubilant FoodWorks, Westlife Development, Parag Milk, Gujarat Narmada Valley Fertilisers & Chemicals and Dewan Housing Finance Corporation which have not corrected despite the broader index correction.

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See Nifty at fresh record high in FY19; 'quality stocks' available post correction

Number of quality stocks have become attractive after the recent correction and these can be value investments.

 

Given the worsening macro scenario and likely inflationary pressure in ensuing months, led by higher oil prices, premium valuations are completely dependent upon the earnings trajectory of companies. A look at 27 companies forming part of the Nifty (excluding banks) shows that adjusted earnings have improved by around 12 percent year-on-year (YoY) as against expectations of 15-20 percent growth. The management commentary of companies has been encouraging as volume growth was robust across sectors. Hence, earnings growth can potentially improve further in coming quarters, which may lead to sustainable premium valuations. The market may also be supported by a persistent flow of domestic liquidity into equity mutual funds. We foresee earnings growth to be in the 15-20 percent range in FY19.

 It is difficult to predict crude oil prices in the near-term. However, there is an upward price bias in the short-term due to supply pressures owing to the recent sanctions in Iran imposed by the US and ongoing production discipline between the Organisation of the Petroleum Exporting Countries (Opec) and Russia. We are hopeful that prices should reverse to $70/bbl levels in the medium-term as higher oil prices tend to impact global economic growth, which ultimately hampers oil demand. Consistent increase in oil rigs in the US (US oil production surpassed 11 million barrels per day) along with the likely breach of production discipline by Opec members at high prices may support oil prices to reverse going forward.

Higher oil prices will certainly impact India’s twin deficit as we import around 80 percent of our total oil requirement. India’s oil import bill for April stood at $10.4 billion (up 41.5 percent YoY). If we extrapolate this figure, India’s oil bill for FY19 is likely to be around $120-125 billion as against $87 billion in FY17. Hence, this incremental bill is certain to have major ramifications on our fiscal deficit, which can also hurt economic growth to an extent.

Nifty is hardly 500 points away from its last all-time high hit in January. Hence, surpass of that level cannot be ruled out given the earnings recovery of companies. We will have two elections in Rajasthan and Madhya Pradesh in second half of 2018. A positive outcome in favour of the National Democratic Alliance (NDA) with a stabilisation in oil prices can augur well for the market.

Given the fact that the upcoming elections in MP and Rajasthan are NDA governed states, it will probably give some indication about the electorate’s mood ahead of general election in 2019. At present, the NDA is ruling in over 20 states. Hence, the outcome of these two states will be taken as an indicator of the likely outcome of general election in 2019.

 Around 40 Nifty companies have reported their Q4 FY18 earnings so far. Excluding banks, 27 companies have reported average earnings growth of around 12 percent, which is certainly lower than our expectations. Considering the management commentary of companies, we foresee earnings recovery in FY19 is to be better than FY18. We expect 15-20 percent earnings growth in FY19.

After the Reserve Bank’s circular regarding recognition of NPAs in February, all banks have reported higher-than-normal slippages in the March quarter. We don’t expect a major upward move in slippages in FY19 as almost all categories of bad assets have now been reported in NPAs.

FY19 will be a year of quality stocks, irrespective of their market capitalisation. Most midcaps and smallcaps have delivered very high returns over the last 2-3 years without much earnings support. The recent correction in midcaps and smallcaps is a consequence of high valuations without earnings growth. Many quality stocks have become attractive after the recent correction and these can be value investments from hereon.

A retail investor should first create an asset allocation plan. If someone has an investment horizon of 10 years, investments in equities should be an integral part of that plan. At a young age, more capital should be allocated to equities for investing on a regular basis. In India, equities have delivered more than 12 percent yearly returns for the last 15 months. In a growing country, where per capita income is still a fraction of the developed world average, equities will keep providing better returns. Therefore, the road to riches goes through equity but it requires patience to practice it.

The shift from offline to online trading, growing prominence of mobile among online platforms, and emergence of data science are some key changes. This has resulted in the investing community taking informed decisions. The focus of brokers is no more partial to equity broking, but shifting to emerging asset classes like mutual funds and insurance.The impact of these changes on the mobile platform has evolved from just being the core for facilitating trades on the go, it now imparts information and provides access to transact across MFs and insurance solutions.

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