Macquarie raises Nifty 1-year target to 12,000, says macro risks higher but not alarming

Macquarie feels the valuation risk is limited to benchmark indices while midcap is still vulnerable.

 

Macquarie India believes cyclical recovery is clearly getting broad-based with infra having turned around and real estate is at the inflection point.

The global brokerage house said the macro risks have increased but are not alarming yet.

The Indian rupee depreciated 14 percent this year to hit record low of 72.97 a dollar and crude oil prices jumped nearly 19 percent to $79 a barrel which both hit trade deficit of the country. In addition, escalated US-China trade tensions added fuel to the fire but improving fundamentals is the only positive and enough to support market.

The Nifty50 gained more than 8 percent and the Sensex rallied nearly 11 percent year-to-date while BSE Midcap and Smallcap indices fell 10 percent and 15 percent respectively.

Macquarie feels the valuation risk is limited to benchmark indices while midcap is still vulnerable.

It holds a Neutral stance on banks & metals while it has positive view on cement, real estate, industrials, IT & autos.

The research house raised 1-year Nifty target to 12,000 based on 16.6x FY20 estimated earnings.

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Wall Street starts year on strong note; Nasdaq ends above 7,000

The Dow Jones Industrial Average rose 104.79 points, or 0.42 percent, to 24,824.01, the S&P 500 gained 22.18 points, or 0.83 percent, to 2,695.79 and the Nasdaq Composite added 103.51 points, or 1.5 percent, to 7,006.90.

   

US stocks rose in the first session of the new year and the Nasdaq closed above 7,000 for the first time on Tuesday as investors were optimistic that 2018 will bring more gains for the market.

The Nasdaq, driven by gains in Apple , Facebook , Amazon and Alphabet , breached 6,000 in April of last year and closed above 5,000 in 2015 for the first time in 15 years. The technology index added 1.4 percent on Tuesday, following a 37-percent surge in 2017 that made it the best-performing S&P 500 sector.

The S&P 500 also hit a record high close. Besides technology, S&P consumer discretionary, healthcare, energy and materials indexes all were up more than 1 percent on the day.

Major stock indexes closed out 2017 with their best performances since 2013. Many investors say the rally could continue this year with help from the recently approved US tax overhaul that is anticipated to boost profits as well as the economy.

We're off to the races once again," said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.

"I don't expect the kind of moves we saw last year. But as long as monetary policy stays the way it is ... my view is stocks are going to have a decent year. And fiscal policy has become stimulative, as well, given the tax bill."

The Dow Jones Industrial Average rose 104.79 points, or 0.42 percent, to 24,824.01, the S&P 500 gained 22.18 points, or 0.83 percent, to 2,695.79 and the Nasdaq Composite added 103.51 points, or 1.5 percent, to 7,006.90.

"Our best guess is the first quarter or half of the year can be OK as a continuation of last year," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

But, he said, "valuations are still stretched, interest rates are still rising, and those will provide headwinds to the market at some point."

The S&P consumer discretionary index was up 1.5 percent, helped by a gain in Amazon of 1.7 percent.

J.C. Penney , Nordstrom and Kohl's climbed after a bullish Citigroup note on the retail sector detailed benefits from the corporate tax cuts.

Energy shares were up even though oil prices dipped. Oil hovered near mid-2015 highs amid large anti-government rallies in major exporter Iran and ongoing supply cuts led by OPEC and Russia. The S&P energy index rose 1.8 percent.

Shares of casino operators Wynn Resorts and Melco Resorts & Entertainment were down after a report showed a lower-than-expected rise in Macau gambling revenue in December.

Abbott Labs jumped 3 percent and hit an intraday record of USD 59.20 after two brokerages upgraded the company's stock to "overweight."

Shares of insurer Allstate were down 2.7 percent following a brokerage downgrade.

Advancing issues outnumbered declining ones on the NYSE by a 1.64-to-1 ratio; on Nasdaq, a 2.01-to-1 ratio favored advancers.

About 6.7 billion shares changed hands on US exchanges. That compares with the 6.3 billion daily average for the past 20 trading days, according to Thomson Reuters data.

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Nifty rally could continue in 2018 towards 12,000, keep these 4 top stocks on radar

No doubt the valuation on the index has moved up from 19 to 26 P/E, so the index might look expensive but again pocket of opportunities exist in various sectors and companies.

 

The valuation picture currently looks little stretched by all means. Is it fair to call this market a ‘buy on dips’?

No doubt the valuation on the index has moved up from 19 to 26 P/E, so the index might look expensive but again pocket of opportunities exist in various sectors and companies. So it's surely a buy on dips market but at the same time if you get good business at attractive valuation today then one should buy it.

2017 has been a great year for Indian equities as the market grew by around 25 percent. Do you see same kind of rally in 2018 also and what is your Nifty target for December 2018?

As we move to 2018, what are your 4 best picks for 2018?

Mirza International

The company sells footwear under the red tape brand and is doing well recently. Their strategy is aligned towards selling more in the domestic market rather than focussing on exports !

This augurs well as the margins in domestic business is very good . They are also expanding into new segments like sport shoes and women's footwear so this will help the company to target a larger set of population we expect company to post good growth and good profitability going forward.

Pondy Oxides

Company is the business of lead processing as global lead mining bans exists in many countries and some countries have ban lead processing due to pollution . This offers an unique opportunity to the Indian lead processors. Pondy has a descent capacity and is financially and operationally well managed company. We expect company to post great set of earnings going forward

DHFL

It is one of the leading housing finance companies with a very low valuation compared to its peers! Last year the company has raised huge capitals and competitive rates we expect the company to keep on posting good earnings growth and profitability and hence we expect he stock to double from current levels in 2018 due to convergence of the valuation gap with peers and due to growth in the segment

Bajaj Finserv

Company is poised for growth as the company's life insurance business has picked up in a very nice way , company holds stake in Bajaj Finance which he done well over the past years. We expect the insurance sector to do well and hence Bajaj Finserv is a good bet for a long term.

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