Dalal Street Investment Journal

Equities To Do Well In 2018 As Well

The economy has seen a flux of innovation, reforms and technology in the ongoing year and is buckling up to embrace and reap the outcomes of these renovations entirely in 2018. Going forward, while the wave of digitisation is likely to strike the consumption and trade patterns more intensely, the prowess of new-age technology and artificial intelligence is set to take the markets by storm in the coming year. The transformations in various sectors such as automobile, with the introduction of electric vehicles and the banking sector, with reforms in insolvency norms, will be the driving factor for much of the market.

The year 2017 has churned out huge returns for investors and traders alike. In a phenomenal rally, over 1,200 stocks surged during the year to generate returns in excess of 25 per cent and over 417 stocks more than doubled in 2017 so far. The year also proved to be unforgettable for mutual fund investors with most of the equity funds delivering returns in excess of 20 per cent. The year saw equity markets overcoming the headwinds brought by demonetisation and GST with consumer durables, metals and realty stocks outperforming the broader markets.

Global equities, aided by synchronous economic growth in the developed world and emerging markets, is likely to do well in 2018. Indian markets will start factoring in the budget announcements and it looks to me that the rural economy will get a higher budgetary allocation, as is expected by several fund managers. The government’s increased emphasis towards the development in infrastructure and rural economy will bear fruits in the coming year. Investors will do well for themselves if they focus on select PSU banks, automobiles and such other stocks that will benefit from the higher growth trajectory of the rural economy. In 2018, we may see commodity prices rise a little bit, and hence, the commodity stocks may do well as well.

In the coming issue, in cover story “Where to invest in 2018”, we have given our market outlook for the next year and have highlighted the key risks that one should look out for. Apart from the views from industry experts, we have shared some interesting statistics on how markets performed in 2017.

In our special story “Focus on 52-week high stocks to beat markets” we have observed those stocks that are near their 52-w highs manage to outperform markets, and in a bull market situation, those stocks that are near their 52-week low tend to underperform the set of stocks which are close to their respective 52-week highs. Do let us know if you find our observation useful and whether it has changed the way you look at 52-week high stocks.

For the long term investors, a bottom-up approach to investing will be highly profitable as there are investment-worthy opportunities in almost all the sectors. The sectors that have done well are expected to continue with the momentum and those sectors that have underperformed in 2017 are expected to improve their performance.