Sensex, Nifty likely to see 15-20% upside in next 1 year: D K Aggarwal, SMC Investments and Advisors

The market would continue its upward journey as the macroeconomic fundamentals of the economy are improving, says Aggarwal.

Both Sensex and Nifty are expected to see 15% – 20% upside going ahead, supported by further pro-growth reforms from the government, says D K Aggarwal, CMD, SMC Investments and Advisors Ltd in an exclusive interview with Kshitij Anand of Excerpts:

ET.Com: What is your Sensex/Nifty target for the next one year? Any specific triggers which can take the markets higher? (earnings/RBI policy)

Both the Sensex and the Nifty are expected to see 15 to 20% upside from the current levels. As told earlier, the government would push more reforms and measures, and this would bring much-needed enthusiasm in the economy as well as in the market.

ET.Com: What is your top five stocks that you would like to recommend to investors for the next one year?

Due to the recent Sebi regulations, I would not be able to comment on this. However, 1) automobile, 2) capital goods, 3) FMCG, 4) financial and 5) private banking stocks should do well.

ET.Com: The Sensex managed to bounce back in the month of May. Do you think the trend with continue next month as well? How do you see the markets trading in the month of June?

It is expected that the market would continue its upward journey as the macroeconomic fundamentals of the economy are improving. With the rate cut in offering by the central bank, foreign investors are expected to be active in the markets on the buying side.

However, the monsoon factor will continue to play its role with the market participants’ sentiments. In the coming days, government reforms and government spending may be two important factors for the market.

Besides, the trend in global markets, investment by foreign portfolio investors (FPIs), the movement of the rupee as against the dollar, inflation data, IIP data and crude oil price movement will dictate trend of the market in the coming days.

ET.Com: India commanded overweight stance within the EM pack. But recent data suggest that GEMs are cutting their stance on India. What could be possible reasons for the same? Should investors be worried?

In the FY 15, the Indian markets continued to move higher and higher on the euphoria over the change of government at the Centre. As the other emerging markets were not convincing as compared to India, India won the game.

India witnessed huge activities of the foreign players. However, the case in China is different. Now the Chinese stock market is moving higher as the central bank is pumping liquidity in the economy to spur growth and the government has eased some of the rules related to stock market investments.

Though of date it is seen that GEM are a bit worried on account of slow pace of reforms, however there is nothing to worry as the growth story of the Indian economy is intact. Yes, the foreign players are a little bit cautions over the MAT issue and slow pace of reform. However, this is expected to get resolved soon.

ET.Com: General consensus is that reforms initiated by the government in the last one year and further initiation of reforms will push the Sensex to record highs in the next one year of the Modi Govt. Do you agree?

Yes, as said earlier, the government’s various initiatives and reform measures taken so far have already started to bear fruits, and a few which have not started yet would start doing now. This could be clearly reflected in the earnings of the Indian companies in coming quarters.

With the cooling of inflation data, much below from the central bank’s target, RBI would get enough space to cut rates and this is sure to help the corporate sectors. The government initiative to make India a global manufacturing hub would give immense boost to the overall sectors of the Indian economy. The efforts of the government to make India an investment destination has been huge successful. India has attracted foreign direct investment worth $34.9 billion between April 2014 and March 2015, which is up by 61.7% from the previous fiscal year.

The government is committed to induce more measures and reforms and this is sure to further boost the economy as well as the confidence of the market participants. It is expected that the domestic market will continue to make new highs in the coming days.

With the improvement in the sentiments, the corporates would also start delivering positive results, making its triumph in bolstering the economy. The interest rate cut by the RBI in the days would surely give much confidence to the corporates, which are now eagerly waiting for the RBI’s action plan. Furthermore, introduction of Goods and Services Tax ( GST) and Land Bill approval are other possible triggers, which may push the domestic markets higher.

ET.Com: What is your verdict on 1 year of the Modi government? A bit of luck has helped the Govt and the economy look in much better shape. Do you think this was an ideal start that the Govt could have got and now things will only improve from here on?

The Modi-led government marked the 1 year in the office in the month of May by vowing to strengthen its drive for “transformational” change. After the Modi government held office at the Center in May 2014, there have been considerable changes in sentiment and outlook towards India.

With changes brought in the policies and reforms initiated to spur growth, the Modi government has clearly enunciated the importance of manufacturing in the comprehensive development of the country and the creation of jobs for young people with ambition.

The ‘Make in India’ initiative has set the tone for transforming India into a global manufacturing hub. Undoubtedly, Mr. Narendra Modi had been successful in arresting the policy paralysis that had hit the nation badly and brought in a new enthusiasm to the corridors of power.

The efforts of the Modi government have been tremendous to spur growth. With the fall of crude prices in the international markets, India got much needed relief in its import bill, which has also helped the current account deficit to shrink. Moreover, it has also helped the inflation to cool off.

Yes, the initiatives taken by the Modi government are making a wide way toward growth. The confidence has returned back and things will continue to improve hereon.

ET.Com: Apart from buying into financials, which is a clear proxy to economic recovery, which are the other key sectors or themes one should look at investing in assuming that good days are just about started?

It is expected that with the initiatives taken by the Modi government under the campaign “Make in India”, sectors like capital goods, defense, auto & auto ancillary would give a good return on the investment. But before jumping into any of the stocks, market participants should do a little research.

ET.Com: In the short term what would drive currency behavior? The rupee being a bit over valued to the tune of 3-3.5%, do you think that adjustment will also come by over the June if the dollar were to gain more?

Over the past couple of weeks, the Indian rupee has lost some of its shine, against most currencies, including the US dollar. However, the domestic currency fell less against the dollar compared to the fall seen in Euro, GBP and other currencies.

Considering the fall in other currencies against dollar at this juncture, the rupee looks a bit overvalued now, and there could be weakness in the short term. So, no surprise if the rupee is driven by dollar strength overseas. In the short term, it is expected that capital and trade flows will drive the currency behavior. So, it depends on equity markets.

By and large, we also do not expect the RBI supplying or buying dollars as its chief activity. In fact, the RBI buys dollar when there is a lot of inflows coming into the market and during those days, it makes some sense for the RBI to buy dollars for the rainy day.


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