The financial year 2017-18 (FY18) ended with S&P BSE Sensex index rising 12%, compared with a 16% rally in the previous year. On the other hand, the Nifty50 index gained 11% in FY18, as against 18% in the previous corresponding period.
As the new financial year 2018-19 (FY19) kicks off today, most analysts expect the markets to remain choppy over the next one year. Upcoming state elections, oil prices, monetary policy of global central banks, geopolitical situation and the fear of an escalation in global trade war are some of the key concerns that can the markets volatile over the next 12 months, experts say.
On the positive side, a pick-up in corporate earnings amid a revival in the economy and domestic liquidity are the three factors that are likely to lend support to the markets.
A K Prabhakar, head of research at IDBI Capital, for instance, feels that markets may witness a major correction heading into the new fiscal and investors need to be cautious while investing. This correction phase, he says, can last till October-end.
"I expect a big correction in the market. In such a scenario, investors should look at companies that are very consistent in terms of financial performance and where valuation is also attractive," Prabhakar says.
TCS (Tata Consultancy Services) and Zee Entertainment are the two stocks he likes. That apart, Power Grid (Power Grid Corporation of India), NTPC, BEL (Bharat Electronics), NBCC (India) are some of the stocks Prabhakar suggests buying on a correction.
G Chokkalingam, founder and managing director at Equinomics Research & Advisory expects banks, automobiles and oil & gas to be the top performers heading into the new fiscal.
The banking sector was significantly affected in FY18 due to frauds and rising non-performing assets (NPAs), which hit the share prices of all the banks, particularly the ones in the public sector (PSU) segment. However, in FY19 selected PSU banks and old private sector banks which have relatively lower net NPA percentage, which are not involved in frauds and have their credit growing in double digits, are likely to perform well.
Top Picks: Banks such as Indian Bank among the PSU banks and South Indian Bank and Karur Vysya Bank among old private sector banks are expected to perform well this year.
Oil and Gas
Prices of crude oil have risen in FY18 due to production curbs by members of the Organization of Petroleum Exporting Countries (OPEC) and Russia. However, the rising production from US is likely to weigh on global crude oil prices in the coming months, which is likely to boost the margins of oil marketing companies (OMCs) in FY19.
A rise in public investment augurs well for the sector.
Top picks: Capital goods sector, mainly comprising of major engineering companies such as ABB India, Siemens, Engineers India, Larsen & Toubro are likely to perform well in FY19
Top picks: Companies such as Mahindra & Mahindra, Maruti Suzuki India are likely to perform well in FY19.