Samvat 2072 started on a firm note as the markets snapped their five days losing streak with both the major bourses posting gains of around half a per cent in the Muhurat Trading session on Wednesday. Not only the bluechips but the broader markets too showed the jubilation and outperformed the benchmarks. The BSE Sensex and NSE Nifty closed 0.48 per cent and 0.54 per cent up at 25,866.95 and 7,825, respectively, on Wednesday. BSE Sensex rose for the 9th time in last 11 Muhurat trading sessions.
The BSE Midcap index and the BSE Smallcap index gained 1.05 per cent and 1.48 per cent at 10,801.24 and 11,211.18, respectively.
Dipen Shah, senior vice-president and head of private client group research, Kotak Securities, said, “Samvat 2072 started off on a positive note on Wednesday, partly buoyed by the announcements related to increase in the FDI limit announced by the Government on Tuesday. Going ahead, in Samvat 2072, we expect fiscal reforms to gather momentum. Important legislations, especially GST, are expected to be passed, even if in a diluted form. Inflation has come off over the past few months and, we believe it will continue to trend lower. This opens up the window for more rate cuts in FY17.”
In Samvat 2071, the hopes of a fast recovery in economy and corporate earnings have fallen short of expectations. Critical reforms are stuck in a political logjam and the pace of recovery in economy is anaemic despite the majority mandate in the general election at the centre and the favourable impact of the softening of commodity prices. Having said this, the government has done its bit in terms of pushing policy changes that do not require legislative nod, like coal mine auctions, restructuring of the power distribution companies and deregulation of prices of petroleum products.
Unlike Samvat 2071, the expectations are pretty moderate for Samvat 2072 though the macro environment is much better now. According to Sharekhan, the twin deficits (current account deficit and fiscal deficit) and inflation are under control. The impact of policy rate cuts of 125 basis points (BPS) by the Reserve Bank of India (RBI) would begin to reflect on demand and corporate earnings. Moreover, the possible passage of some critical pending bills in the forthcoming winter session of the Parliament could provide the necessary boost to sentiment. Consequently, we retain our positive stance on equities.”
The brokerage house believes that it would be prudent to turn more selective in defensive sectors, information technology (IT) services and pharmaceuticals (pharma). The best performing pockets could be financials and urban consumption companies. Lastly, it is likely that mid-caps and bottom-up stories may outperform the Sensex and the Nifty in this year also.