After Modi’s landslide win in the Lok Sabha polls stock market experts say that with the uncertainty of the event behind, the focus would be back to earnings growth and other fundamental factors. Interestingly, after the Sensex and Nifty scaled new peaks of above 40,000 and 12,000 respectively, global brokerage firm Morgan Stanley has raised its target stock price to 42,500 by June-2020, and 13,500 on Nifty in the same time-frame. “This likely continuity in administration is source of comfort for stocks due to an accompanying policy predictability. We expect some shifts in the policy regime, Morgan Stanley said in the report. Morgan Stanley has added Asian Paints and Interglobe Aviation (IndiGo) to its Focus List at the expense of Adani Ports and Eicher Motors. “We are overweight domestic cyclicals, both consumer and industrials, as well as financials, and underweight defensive sectors including healthcare and technology,” the firm said.
Sharing his outlook on the direction of stock market going forward, Neelkanth Mishra of Credit Suisse said that elections do not have a long-term impact, but earnings are key. According to the expert, banks will contribute 60% to Nifty’s earnings in the fiscal year 2020 and top eight banks will generate Rs 1 trillion in profit for the year. “Most banks reported an expansion in net interest margin in last two quarters,” Neelkanth Mishra, Managing Director and India Equity Strategist at Credit Suisse said in an interview to CNBC TV18. The brokerage firm is ‘overweight’ on index heavyweights ICICI Bank, HDFC Bank and SBI.
According to global brokerage firm CLSA, with a bulk of disruptive reforms now behind us, the focus of the government will shift on growth. Absolute majority will reduce the need for competitive populism. The firm expects midcaps to be back in favour, as domestic flows improve. CLSA’s top large-cap picks include ICICI Bank, Axis Bank, HDFC, Ultratech Cements, Bharti Airtel, Reliance Industries and ONGC.
The stock markets are expected to remain stock specific, says Prabhudas Lilladher, adding that it retains focus on domestic consumption. The Nifty has seen mid- single digit EPS CAGR since past 7-8 years, noted the firm. “We are increase weightage for Financials with higher weightage for HDFC Bank, ICICI Bank and HDFC . We reduce weight to Tata Steel (European Demerger call off) and replace ACC by Ultratech Cement,” the firm said in a report.
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