Markets
BSE See NSE See 39,599.19
164.25 (0.42%)
collapse Related Readings collapse

Opportunity In The Guise Of Adversity

| 11/29/2012 9:02 PM Thursday

  • The Road Ahead - 2013 will be a challenging year for the global markets. With the US Presidential elections out of the way, there is a clear vision for the next four years. The same cannot be said for Europe though.
  • Domestic Stimuli - The domestic triggers are actually in the hands of the policy makers. Whether spending wins or deficit control remains central will guide institutional investors in the months ahead.

Advises - Sonam H. Udasi (Head – Research IDBI Capital)

India is currently facing headwinds, both domestic as well as global. There are concerns on how the European crisis will pan out and how a slowing China will affect growth. At home, India is facing the twin challenges of high inflation and lower growth. With a high fiscal deficit, the policy focus is on raising revenues and controlling expenditure. Raising revenues is proving to be easier said than done. The disappointing response to the spectrum sale and sluggish pace of divestment so far are adding to the headwinds.

If we talk about the financial numbers of India Inc. in the quarter gone by, there was marginal overall out-performance versus expectations. Of course, this was because the expectations were muted. The PSU banking numbers have been disappointing, while the results of Pharma, IT and FMCG companies were largely in line with or above the estimates. The full year earnings expectations for the benchmark Sensex and Nifty continues to be in range of seven to nine per cent and is largely unchanged. The Auto sector, especially two-wheeler, has remained under pressure. In IT, the volume growth remains a cause of concern.

High inflation has remained a concern on the domestic front. The Deputy Governor of the RBI has recently stated that inflation remains a cause of concern and until it heads south, the bank will not be able to tweak the interest rates meaningfully. While the RBI may be thinking of cutting the interest rates, the process may be slow. The thing is that a 25 or 50 basis point cut in interest rates is unlikely to matter that much and kick start growth. On the question of whether the interest rates have peaked or not, we can certainly say that they have. People may hold differing views on the timing and quantum of interest rate cuts by the RBI, but everyone will agree that in a year from now, the rates will be lower than where they are today. On the currency front, we feel that in the next year, the rupee will continue to remain subdued and will be in the range of Rs 54-56 per USD.

Coming to the global scenario, we think that 2013 will be a challenging year for the global markets. However, the US markets will fare better than their global peers. The data coming out from that geography is encouraging. The unemployment rate is steady and realty prices have started recovering. With the US Presidential elections out of the way, there is a clear vision for the next four years. The same cannot be said for Europe though. Germany will face elections in the next year. The EU leaders are constantly at loggerheads with each other, and we see that the Greek bailout is not without fissures. In China, it is expected that the rate of growth will be much lesser that what it clocked in the last decade. These are challenge points for the global markets, which underline the risk element still out there.

So, what can provide a solid trigger to the markets in this risk-dotted environment? In my view, these challenges provide an opportunity in the guise of adversity. Whenever we have faced pressures, extraordinary reformist measures have been taken and the markets have slowly but surely reacted positively. We have seen that in the last three months. The triggers are actually in the hands of the policy makers. The ongoing winter session as well as the upcoming budget will be watched closely. Whether spending wins or deficit control remains central will guide institutional investors in the months ahead.

We are currently overweight on sectors like media because of the digitisation drive that is happening across the country. We are also starting to get overweight on PSU banks. We know that the rates will be lower than what they are today, and therefore should give PSU banks some cushion against provisioning for stress assets. The valuations of this pocket are reasonable with a two-year view.

We advise investors to maintain a cautious approach and invest with a two-three year view. The situation is going to be increasingly volatile going ahead. So, if you do not have a medium to long-term view, it will prove difficult to adjust to market volatility.

 

Find More Articles on: DSIJ Magazine, Broker's Best, Markets, Market Outlook, New To Markets, Investment Strategies

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

Ducon Infra partners with Sterling & Wilson to bid for large GFD projects

Apurva Joshi / Article rating: 5.0

Ducon Infratechnologies Limited has entered into a strategic tie-up with Sterling & Wilson Private Limited, a flagship group company of Shapoorji Pallonji Group, to jointly bid large-sized FGD tenders. Ducon is an emerging technology company providing solutions in the industrial, infrastructure and digital space to multiple business segments across varied industries.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.