Expectations run high ahead of Samvat 2073

Most domestic brokerages upbeat on stock performances over the next year

Brokerages are optimistic on the market’s performance over the course of Samvat 2073, the Hindu calendar year, on the back of positive domestic triggers such as a good monsoon, lower inflation and interest rates. However, global events such as the US presidential elections, US Federal Reserve’s monetary tightening and subdued world economic outlook will mean continued volatility, say market experts.

Samvat 2072, which will come to an end on October 30, saw benchmark indices rally 10 per cent. However, they witnessed a 10 per cent decline on concerns of a global slowdown at the beginning of the Samvat before a sharp recovery after the Union Budget on February 29, 2016. Unlike the start of the Samvat 2072, when the Street was gripped with pessimism, market players are positive on the economic and market prospects this time around.

“We expect returns in Samvat 2073 to be better than 2072, notwithstanding intermittent bouts of corrections and profit-booking,” says a note by Kotak Securities. “Strong pick-up in earnings and return to double-digit growth in revenue are crucial for markets to move up on a sustainable basis. We remain bullish on markets,” adds a report by Motilal Oswal.

The brokerage expects earnings of Sensex companies to grow at a compounded annual rate of 17 per cent between financial year 2015-16 (FY16) and FY18, compared to six per cent during FY08-16.

According to Motilal Oswal, the positive triggers include this year’s good monsoon, expectations of further softening in inflation, rollout of the Seventh Pay Commission’s award and passage of the goods and services tax Bill. Meanwhile, markets could be impacted by concerns of global economic slowdown, US interest rate raise and geopolitical events.

In the past year, Indian markets have received foreign institutional investor flows of around $6 billion (about Rs 40,097 crore). Market players expect the tally to increase in the next year as India, although expensive, remains one of the most promising markets globally.

“Even with the backdrop of a volatile market, there is little doubt that foreign investors see India favourably. India will continue to attract foreign capital inflows, trading interest, political alignment and strategic friendship from diverse blocs of countries,” says HDFC Securities.

Most brokerages expect private banks and non-banking finance companies and other domestic consumption-led stocks to do well.

“Earnings seem to have bottomed out. Most companies are expected to post growth in their earnings and sectors such as automobile, infrastructure, cement, consumer durables and capital goods will benefit the most from this revival,” says a note by Angel Broking.