Happy New Year 2018! Nifty likely to climb Mount 11K by December-end: Poll

Experts believe that Nifty is likely to scale Mount 11K in the year 2018.

After a blockbuster 2017, all eyes are on the year 2018 which promises to be eventful and another year of record highs for equity markets.

 

The Nifty50 rallied from 8,185 levels recorded on 30 December 2016 to 10,493 on 22nd December 2017, a gain of almost 2,300 points or 28 percent.

But, the rally is not over yet as most experts believe that Nifty is likely to scale Mount 11K in the year 2018, according to a poll conducted by Moneycontrol.com.

As many as 46 percent of the poll respondents feel that the Nifty50 is likely to scale above 11000 by 2018 December-end, while the rest 40 percent feel that it would hover in the range of 10,000 to 11,000.

One participant feels that the Nifty has the potential to climb Mount 12K or remain in the range of 11500-12000. Not everyone is optimistic about the year 2018, one of the analysts polled by Moneycontrol said that index could well trade below 10,000 towards the end of 2018.

The rally in the year 2017 has been largely driven by expansion in P/E multiples with earnings growth faltering due to the 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.

Global brokerages such as BofAML, Morgan Stanley, Credit Suisse, and BNP Paribas see Indian market to touch fresh record highs in the next calendar year.

BNP Paribas has the most aggressive target on Sensex among all the other global investment banks’ which have come out with their strategy reports.

BNP Paribas maintains its overweight stance on Indian markets and sees the S&P BSE Sensex heading towards 37,500, which translates into an upside of nearly 10 percent from current levels.

One big worry for the analyst’ community going forward is growth in earnings for India Inc. The September quarter results were largely in-line with estimates which is a good sign but December quarter results will dictate the trend for markets in the first month of 2018.

Most analyst’ polled by Moneycontrol feel that earnings recovery is in place as 60 percent of the respondents feel that improvement in the corporate earnings growth should start happening from December quarter while the rest 40 percent are not that convinced.

Earnings recovery is one of the crucial factors which is likely to drive the trend for the markets. Even though some analyst feel that a correction could come in if earnings fail to bounce back while others feel that a double-digit recovery is in sight.

“In the long-term, the equity market is a mirror of earnings growth. During last 7-8 years, corporate earnings growth was 7-8 percent CAGR and Sensex delivered similar returns,” Rajesh Kothari - Founder and Managing Director of AlfAccurate Advisors told Moneycontrol.

“During next 3 years, as earnings growth improves, the market has a potential to deliver double-digit returns - compared to fixed income which gives 4-5% net of tax returns,” he said.

Commenting on the upcoming Budget, most analyst preferred to stay away but the general consensus is that nobody wants the government to present a populist Budget 2018.

The work on Modi Sarkar's last full Budget has already begun and after a close encounter in the Gujarat Assembly elections, the talk of populist Budget has gathered steam.

As many as 53 percent of the analysts’ preferred not to comment on the Budget while 27 percent feel that it will be a populist one and the rest 20 percent want to go with a reformist Budget.

“We do not believe that the government will present a populist budget. This government has been prudent about fiscal spend so far and we believe that the same will continue,” Prasun Gajri, Chief Investment Officer, HDFC Life told Moneycontrol.

“However, it is possible that the pace of consolidation may differ from what was presented earlier. This will largely be led by bank recapitalization and the teething issues related to GST implementation,” he said.

One big worry which could become a concern for the Indian market is rising crude oil prices. Right now, the Brent crude is hovering near USD 64, up 12 percent approx. on a year-to-date (YTD) basis.

The price per barrel of Brent crude crossed USD 60 mark this month, against USD 40 a year ago but it is still well below the USD 115 peak reached in 2011. A high crude oil price increases the risk of higher current account deficit.

Almost 80 percent of the respondents are of the view that if the crude inches towards USD 65-70/bbl if will hamper bull run for Indian equity markets as now the Street might have to deal with other macro challenges.

MORE WILL UPDATE SOON!!

Outcome of Exit Polls in Gujarat among top 5 factors cheering Sensex, Nifty

Frontline indices witnessed a gap-up opening, with the Sensex gaining over 300 points in the first few minutes of trade, while the Nifty managed to reclaim 10,350 mark.

   

The Indian market on Friday cheered the exit poll outcomes for Gujarat and Himachal Pradesh Legislative Assemblies, which predicted a comfortable victory for the ruling Bharatiya Janata Party (BJP).

The positivity in the market is on the back of assurance of a political stability, which is key to passing of important reforms for the economy at the State and Centre levels.

Frontline indices witnessed a gap-up opening, with the Sensex gaining over 350 points intraday in the first few minutes of trade, while the Nifty managed to reclaim 10,350 mark.

Exit Polls suggest victory for BJP

Exit polls released by various news organisations and survey agencies on Thursday revealed that the ruling-Bharatiya Janata Party (BJP) is likely to retain power in Gujarat following the 2017 assembly election.

While most polls suggested that the Congress had improved its tally in north Gujarat, the ruling party continues its dominance in south Gujarat.

In the 2012 assembly polls, the BJP won 115 seats, just short of the two-thirds mark, while the Congress won 61 seats in the 182-member assembly. BJP and Congress had a vote share of 47.90 and 38.90 percent, respectively. Former chief minister Keshubhai Patel's Gujarat Parivartan Party (GPP), which was hoping to dent the BJP, ended up winning only two seats. The party was later merged with the BJP. The Nationalist Congress Party (NCP) and the Janata Dal (United) bagged two and one seat respectively.

Meanwhile, exit polls released by various news organisations and survey agencies on Thursday revealed that the Bharatiya Janata Party (BJP) is set to end Congress' rule in Himachal Pradesh. The poll results also indicated that the BJP would win with a 51 percent vote share in the Himalayan state, while Congress's vote share would be 38 percent. Other candidates will take home the remaining 11 percent votes. The agency said that the final result could be somewhere between plus or minus seven in terms of the seat share and three percent in terms of the vote share.

Technical Breakout

Ahead of the announcement of exit polls on Thursday, the Nifty ended above 10,250, making a Hammer-like pattern on the daily charts.

A Hammer which is a bullish reversal pattern is formed after a decline while Hanging Man is a bearish reversal pattern. In this pattern, market witnesses a significant selloff towards opening but manages to recoup some of the losses and closes near the opening level.

Formation of a bullish candle after two successive bearish candles suggests that market is now factoring in a favourable victory of BJP in the upcoming poll results next week.

For the bullish momentum to continue, experts had suggested that the index has to surpass its crucial resistance level placed around 10,350 levels. In this case, the Nifty has managed to surpass that in the opening tick, setting the course for the market ahead.

Booster from US Fed -- no aggresive rate hikes in 2018

The US Federal Reserve, in its recent policy meeting, announced that there could be no aggressive rate hikes in the following year, leading to some relief among emerging markets.

The US central bank came through on a widely expected interest rate hike on Wednesday following its two-day policy meeting and sharply raised its economic growth forecast for 2018.

In their decision, the central bank policymakers mostly followed the script, though they did indicate that one less hike is on the way for 2019. Two Fed presidents voted against the increase — Charles Evans of Chicago and Neel Kashkari of Minneapolis.

The move will push the target range to 1.25 percent to 1.5 percent. The rate is pegged to a wide variety of debt instruments, such as credit cards and adjustable-rate mortgages. The Fed has persevered in hiking rates gradually, with this week's raise being the third quarter-point move in 2017. Projections for 2018 remained unchanged at three more increases.

Global brokerages betting on macro visibility

On the macro front, market experts are looking forward to improving economic and macro scenario. This, if transpired, would lead to more upward moves on the market going forward.

The Indian division of Credit Suisse sees India’s macro economic visibility improving in 2018. However, the growth prospects for the economy are likely to remain weaker than currently expected, according to Neelkanth Mishra, Managing Director and India Equity Strategist at Credit Suisse. "Structural reforms have weakened visibility on most macroeconomic parameters," Mishra said.

“We have long considered India as a ‘house under renovation’. Structural reforms such as the Good and Services Tax (GST), the Insolvency and Bankruptcy Code (IBC) and the setting up of Real Estate Regulators (RERA) in states while structurally positive, have introduced significant uncertainty around growth, fiscal deficits, inflation, interest rates and banking system health,” he added.

Fundamentally, we are turning a corner in terms of economic and earnings growth, Pramod Gubbi, Head of Equity at Ambit Capital, told CNBC-TV18 in an interview. He expects December quarter earnings to see a pick up on the back of a recovery in environment and a weak base from the last quarter. “In terms of sectors, consumer discretionary and IT could show improvement in terms of growth,” he told the channel. Overall, he expects around 15 percent growth in earning for FY19.

Oil stable on tighter market

After witnessing a sudden spike to USD 65 levels, oil prices seem to have stabilised by now.

Oil markets were stable on Friday as the Forties pipeline outage in the North Sea and the ongoing OPEC-led production cuts supported prices, while rising output from the United States kept crude from rising further.

US West Texas Intermediate (WTI) crude futures were at USD 57.15 a barrel at 9:40 hours IST, up 0.19 percent from their last settlement.

Brent crude futures, the international benchmark for oil prices, were at USD 63.26 a barrel, down 0.08 percent from their last close.

Traders said markets were overall well supported by efforts led by Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold supply to prop up prices.

MORE WILL UPDATE SOON!!