The markets could be a safer place in the second half of the year
Predicting how the markets will behave has become a perilous business. With Lok Sabha elections looming large, which way the market will go is anybody's guess. The first month of the year saw share prices dropping and the volatility is likely to continue till the new government is in place.
“We are not looking at a pre-election rally now,” says Nitin Kamat, director of Zerodha. But Rakesh Goyal, senior vice president, Bonanza Portfolio, foresees a bullish trajectory for the markets. He bases his prediction on the populist measures the Union government is likely to roll out before the elections.
Dinesh Thakkar, CMD of Angel Broking, says the macro-economic outlook seems to be on a growth trajectory. “Recovery in global growth is expected to continue to boost export performance along with depreciation of the currency,” he says. With exports outdoing imports currently, the trade deficit has been addressed and CAD is likely to touch a moderate 2.5 per cent of the gross domestic product next fiscal. That would be half of what it was last year. Post elections, experts expect the investment environment to clear up, leading to further growth.
The US Federal Reserve's decision to roll back its monetary stimulus had set off alarms among investors in India despite both the government and the Reserve Bank ensuring that necessary steps were taken for stability in our financial markets. Though experts did not foresee it affecting the markets, Sensex plunged 225 points the day the announcement was made. “The impact will be negative for the short term,” says Rahul Shah, vice-president, Equity Advisory Group, Motilal Oswal Securities.
But there are those who believe that the tapering could have a negative impact on the markets. “This correction is not an overreaction. Investors do not invest in emerging markets as they do in developed markets. Hot money rushes in when the economy insinuates growth while gushing out just as quickly when things slow down. This in turn leaves piles of devalued local currency which could leave RBI hardpressed to prop currency exchange values up,” says Kamat.
While external factors have for the most part dictated market sentiments, the elections would set the tone for the future. “Markets are likely to gain momentum in case any political party gets a strong mandate to form government,” says Thakkar. “The key focus for any new government would be on revving up the growth engine in the economy and creating more job opportunities.”
The third quarter results have been in line with expectations showing a better time for India Inc, but the markets were shaken by other factors that led to profit booking. “Most of the stocks had witnessed pre-result rally, and afterwards fell due to profit booking. However, going forward, we expect that as markets will stabilise, renewed buying can be seen on fundamental aspects. Sectors such as IT, pharma and private banking may be considered for buying. Banking sector has been hit recently due to interest rates hike and rise in NPAs in some of the banks. However, going ahead, we expect that positive measures will be taken, and this sector can see good recovery,” says Goyal.
Amar Ambani, head of research, India Infoline, says 2014 will be better than 2013. “Especially the second half of the year,” he says. “Revival in exports, fall in CAD, stability in rupee, thriving rural economy and likelihood of stable government will work in favour of the markets. Subsequently, slower pick-up on GDP growth rate, high interest rates, mixed views on fiscal deficit reporting and slow pick up in infra cycle could work against it.”
Predicting how the markets will behave has become a perilous business. With Lok Sabha elections looming large, which way the market will go is anybody's guess. The first month of the year saw share prices dropping and the volatility is likely to continue till the new government is in place.
“We are not looking at a pre-election rally now,” says Nitin Kamat, director of Zerodha. But Rakesh Goyal, senior vice president, Bonanza Portfolio, foresees a bullish trajectory for the markets. He bases his prediction on the populist measures the Union government is likely to roll out before the elections.
Dinesh Thakkar, CMD of Angel Broking, says the macro-economic outlook seems to be on a growth trajectory. “Recovery in global growth is expected to continue to boost export performance along with depreciation of the currency,” he says. With exports outdoing imports currently, the trade deficit has been addressed and CAD is likely to touch a moderate 2.5 per cent of the gross domestic product next fiscal. That would be half of what it was last year. Post elections, experts expect the investment environment to clear up, leading to further growth.
The US Federal Reserve's decision to roll back its monetary stimulus had set off alarms among investors in India despite both the government and the Reserve Bank ensuring that necessary steps were taken for stability in our financial markets. Though experts did not foresee it affecting the markets, Sensex plunged 225 points the day the announcement was made. “The impact will be negative for the short term,” says Rahul Shah, vice-president, Equity Advisory Group, Motilal Oswal Securities.
But there are those who believe that the tapering could have a negative impact on the markets. “This correction is not an overreaction. Investors do not invest in emerging markets as they do in developed markets. Hot money rushes in when the economy insinuates growth while gushing out just as quickly when things slow down. This in turn leaves piles of devalued local currency which could leave RBI hardpressed to prop currency exchange values up,” says Kamat.
While external factors have for the most part dictated market sentiments, the elections would set the tone for the future. “Markets are likely to gain momentum in case any political party gets a strong mandate to form government,” says Thakkar. “The key focus for any new government would be on revving up the growth engine in the economy and creating more job opportunities.”
The third quarter results have been in line with expectations showing a better time for India Inc, but the markets were shaken by other factors that led to profit booking. “Most of the stocks had witnessed pre-result rally, and afterwards fell due to profit booking. However, going forward, we expect that as markets will stabilise, renewed buying can be seen on fundamental aspects. Sectors such as IT, pharma and private banking may be considered for buying. Banking sector has been hit recently due to interest rates hike and rise in NPAs in some of the banks. However, going ahead, we expect that positive measures will be taken, and this sector can see good recovery,” says Goyal.
Amar Ambani, head of research, India Infoline, says 2014 will be better than 2013. “Especially the second half of the year,” he says. “Revival in exports, fall in CAD, stability in rupee, thriving rural economy and likelihood of stable government will work in favour of the markets. Subsequently, slower pick-up on GDP growth rate, high interest rates, mixed views on fiscal deficit reporting and slow pick up in infra cycle could work against it.”
