Broker’s Blurb

The optimism in India on the back of resounding victory of NDA in the general election led by Mr Modi, is at crescendo! The Stock Markets more than adequate reflect this. So markets are currently ahead of its intrinsic value. But there is nothing to worry as typically when markets are on a road to a multiyear bull markets, stock prices remain ahead of the valuations. So if we see FY16, one year ahead it’s available at 15 times, which is not expensive. As compared to other emerging Markets, India has a unique opportunity, in the sense a growth & reforms friendly PM, & falling oil prices & improving fiscal scenario accompanied by falling Interest rates. This could prove a great recipe for GDP growth to climb back to 7-8 per cent. So in all probability, unless a major international event derails this process, India will be ahead of other emerging markets and hence premium will continue for India over others.

Nonetheless, result for the second quarter of FY15 ended on a muted note. Save for a few companies which surprised the street on a positive side both on topline & margins, the large pack either met the expectations or were below the expectations. Therefore we believe FY15 will end with Nifty EPS growth of 11 to 13 per cent, while we broadly expect EPS CAGR to accelerate going forward and will be between 16 to 18 per cent from FY16 to FY19.

The stability of rupee is playing its own part in the moving the market and credit should be given to RBI that they have managed the stability of Rupee very well. While major currencies in the world have depreciated vis-a- vis USD, rupee is still gradually moving. So a gradual depreciation is very much healthy for our economy & its growth, also keeping in mind the inflation. While Inflation is decisively headed southwards on the back of falling oil prices, & other commodity prices (local as well international), it will make that much easier for RBI to hasten the process of cutting interest rates. Since they have a lot of data as well certain view they may do it at their own pace. But surely interest rates can fall by 100 to150 basis points over next 18 months. Also apart from these factors like end of ,QE3 likely upward interest rate movement on back of stronger USA economy by US Fed will all weigh while taking the decision to lower interest rates.

Going forward on the immediate basis the first full-fledged budget of Modi Govt will be a big trigger. Whether he meets those expectations is a different ball game. But in a run up to that we can see the hopes & expectations can build a mini euphoria. Who knows, if he really delivers on reforms, being so pragmatic, the markets momentum can continue. Economic revival is also eagerly awaited, & everyone will keenly watch the signs. Improving fiscal health & its assurance can bring further big FII money

What remains tricky as of now is the global market. With Japan in recession, Europe largely unstable, China still struggling with deceleration pangs, other emerging markets reeling under falling commodity prices, the world is in a slippery zone. So the challenge for India is can it be an island of growth amidst the grim world scenario where only USA stands out, worse can the grimness become contagious for India too? Well the growth oriented Modi Govt can hopefully navigate through this situation well.  The sector that are looking attractive now are PSU banks, PSUs, infrastructure companies for next couple of years

It is indeed a splendid opportunity for retail investors to create long term wealth over next couple of years. Think long term, get a good advisor, invest in mutual funds too, but start allocating a good amount of your savings to equity