Big Voices on D-Street: Worst looks over, but some challenges persist

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The Indian equity market has been struggling for over a year, thanks to a volley of domestic, as well as, global headwinds.

From the US-China trade war to the deteriorating domestic economy, investors have had a plethora of reasons to worry. However, the gloom of the market seems to be fading now.

Comparatively better quarterly earnings of the corporates, the measures taken by the government to support the economy and the positive signals from the US-China trade talks are bolstering the optimism that the worst may be over for Dalal Street.

The Samvat 2076 began on a positive note for the Indian market as equity barometer Sensex and Nifty logged healthy gains on Muhurat trading on October 27.

Market veterans are of the view that the coming days look promising.

“I remain optimistic on the market as perhaps the worst is over, there would be greater and glider tiding for the market in Samvat 2076,” market veteran, Ramesh Damani, Member of BSE told CNBC-TV18.

“There is a visible turnaround in sentiments and one hopes that we may witness a broader upmove in the markets soon,” said Dhiraj Relli, MD & CEO, HDFC Securities.

Motilal Oswal, Managing Director & CEO of Motilal Oswal Financial Services has the same view.

“I am optimistic about the medium to long-term perspective. I see tremendous interest amongst foreign investors. Brand India is at its all-time high. The government is also proactively addressing many basic issues. After the big bang corporate tax cut, I am hopeful that there will be individual income tax rate cut and see many more reforms on the way,” he said.

Market observers believe that the pessimism is overdone and the market is ready to resume its upward march. Even though everything will not come back to normal immediately, the negativity is going to end now.

Raamdeo Agrawal of Motilal Oswal Financial Services thinks the economy will not go down from here.

“I don’t think the economy will deteriorate any further from hereon. I am 100 percent invested. We invest in quality and growth,” Agrawal said in a chat with CNBC TV18.

In the next three years, there could be 12-15 percent compounded gains in the market, said market veteran Madhu Kela in a chat with CNBC TV18.

“The recovery in the economy is going to be slow but steady. Not all stocks will come back immediately, but the market will reconcile,” he added.

Things look fine. But that doesn’t mean the market is devoid of challenges. Some pressure points still persist.

S Naren, CIO, ICICI Prudential AMC in a chat with CNBC TV18 said the key five indicators of the economy – the credit growth, power demand, oil demand, container traffic and auto numbers – are still indicating that the economy is in relatively bad shape.

Naren said that the economy will take some time to recover and one should remain invested for a longer time.

Experts feel the government and the RBI need to continue their moves to comfort the economy.

Udayan Mukherjee, Consulting Editor of CNBC-TV18 said that the government will have to do more in terms of stimulation to stoke consumption.

He said that the capex will come back in a hurry and the first thing to watch out for would be how much more the government and RBI can do to bring the economy back on track considering the unpredictable global environment.

Domestic brokerage firm Yes Securities sees a prolonged consolidation phase for the Indian equities.

“We see a long consolidation for equities. Our view finds support from several triggers besides the protracted corporate slump, including the GDP growth dip, severe liquidity squeeze, sluggish urban and rural consumption across states and product segments and the ensuing impact on sentiments. The consolidation that began in 2018 is likely to travel deep into the year 2020,” Yes Securities said in a recent report.

The brokerage said corporate tax incentives will only help in the medium to long-term and exports are unlikely to see a meaningful surge given the sticky infra and credit challenges.

Slow consumption demand, weak credit situation, incremental asset quality stress in the financial sector and mounting socialist commitments in government expenditure are the other factors that will weigh on equities, Yes Securities said.

However, the brokerage said that the earnings yield of equities is attractive and supportive of high valuations. A bearish outlook on oil and commodities in general also upholds India’s case.

The bumper monsoon also augurs well for the next Rabi crop. To offset the expenditure burden, the government seems intent on fast disinvestment of the likes of BPCL, which is a positive development, Yes Securities said.

While the market is readying to scale fresh highs, a lot will depend on the government and private sector capex. Fresh measures by the government to boost demand and consumption will be the trigger that will unleash the bullish sentiment, experts opined.

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