Capital markets gearing up to enter uncharted territory

Source: The Hitavada      Date: 25 Apr 2017 09:27:57

Business Bureau,

THE barometer of the economy -- the Sensex is very close to breaching the psychological 30,000-point mark and enter an uncharted territory. “It is just a matter of time before the Sensex breaks 30,000 points and enters into a new orbit,” said CA Kailash Jogani while talking to The Hitavada on Monday.

“The Sensex would have marched forward and taken 30,000 points much earlier but the demonetisation of Rs 500 and Rs 1,000 banknotes, which affected the sentiments of investors, had put a temporary halt to the run-up. Now that things have stabilised and quarterly results are according to market expectations, there is a possibility that the Sensex will capture the 30,000-point mark,” he said.

Going into a higher trajectory, the Sensex had created a lower base at the 26,000-mark and Nifty at 8,900-mark. It could take the Sensex a few months or even a few weeks to cross the 30,000-point level. The capital markets were offering huge opportunities to enter on every dip. Investors would have to watch very closely and take a call to enter at higher levels. All eyes would be on the monsoon predictions and El Nino effect on agriculture, he added.

The International Monetary Fund (IMF) had predicted that the Gross Domestic Product (GDP) was favourable and on the path of growth. Institutional investors were also anticipating a stable Government in the coming 2019 elections. The Government had also announced the roll-out of GST by July 1. IMF had announced that GST could raise the GDP by atleast one per cent. All these factors had had a positive effect on investor sentiments, he said.

On the global scene, there were a few major concerns like the US Federal Reserve raising interest rates, visa restriction on Indian IT firms and tough stance on Indian pharma companies. “If the monsoon is going to be bad, then there is a chance that the Reserve Bank can raise interest rates,” he suggested. Investors should look at sectors like infrastructure, banking, cement, commodities etc. and invest in sound and fundamentally strong companies with more than one-year perspective. Similarly, investors should avoid IT, pharma, penny stocks and speculation, he added.
On April 4, the Sensex scaled the 30,000-point level and closed lower at 29,974.24 and the Nifty ended at 9,265.15.
CA T S Rawal said that there was an inherent psychological tendency among investors to sell at peak levels. The markets had entered into a consolidation phase before breaching the 30,000-point mark.

The roll-out of GST by the Government, the biggest tax reform since Independence, would be a game changer and could raise the GDP of the country by one per cent. But this had already been discounted by the markets. The main trigger would be the prediction of the monsoon which could provide a big boost to the rural economy. Once the Sensex breached the 30,000-point mark, all the euphoria would break out to take the markets to a higher altitude. In such an euphoric situation, all bad news would be neglected.

He suggested that investors should look at focus areas of the Government like infrastructure where huge amount of spending was taking place. Anuj Badjate of Badjate Stock and Shares Pvt Ltd said that looking at the deeper market, mid-caps and small-caps had already breached their all-time high levels. It was only the large caps that were lagging behind and holding back the Sensex from surpassing the 30,000-point mark. IT, public sector banks and pharma sectors were not performing thereby dampening investor sentiments.

Badjate suggested that investors should buy shares of companies in the commodity, infrastructure, cement, steel and petrochemical sectors.
CA Julfesh Shah said that the sentiments in the market were very positive looking at the future growth and speedy reform process initiated by the Government. Investors should buy on dips and select shares of fundamentally sound companies with a long-term view of more than one-year horizon. By holding on for one year, investors could get 20 to 25 per cent returns on investments.