Those expecting Sensex and Nifty to repeat the stellar performance of last year in 2018 as well may be up for a shock as returns will be largely capped this year, says Pramod Gubbi of Ambit Capital. “The year 2018 is unlikely to match 2017 returns,” said Pramod Gubbi in an in an interview with CNBC-TV 18. However, auto, retail and jewellery stocks and cyclical stocks such as roads and construction will be among the best-performing stocks in 2018, said he. “Sharing his expectations on earnings growth, the projected 15 percent earnings growth at the index level. Talking about the rising bond yields, Pramod Gubbi said, “Bond yields will continue to rise up for now. Even the lenders relying on the bond markets could get impacted.” He showed surprise over the government’s decision to go for a stimulus package given the present state of the economy. He also added that the rural sector will get some benefit from fiscal revenue.
Earlier top banker Uday Kotak had sounded a word of caution for investors in the stock market. In a letter to employees of Kotak Group yesterday, the top banker had raised concerns over investor exuberance in the capital markets. We take a look at three key concerns raised by Uday Kotak. Uday Kotak observed that investors are perceiving debt to be riskier than stocks, and shifting their allocation to equities. “Keeping aside the valuations and earnings argument, the factor that worries me is debt instruments are being perceived as high risk (in view of hardening of interest rates and the resulting erosion in value of the instrument) and that investors are shifting from debt to equity which is being perceived safer in comparison,” the ace banker observed in a letter to employees of Kotak Group yesterday. In November this year, Leo Puri of UTI AMC advised investors to look beyond equities, and debt market provides a good opportunity. “ One should look beyond equities. There are very good opportunities in debt. Financialisation must involve allocation to debt,” the top fund manager told BTVi. According to the top banker, the stock prices are trading at all-time high levels. “With stocks reaching new highs every day, the current bull run of the capital market looks extremely tempting. I would advise investors to exercise caution as stock prices are moving up.” Uday Kotak said.