2020 likely to be a year of consolidation, says Aditya Birla AMC

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Published: January 15, 2020 3:20:48 AM

Aditya Birla Sun Life Asset Management Company (AMC) is of the view that 2020 could likely be a year of consolidation as the economy and earnings catch up with the markets and transition as the broader market starts participating.

Foreign portfolio investors, Aditya Birla Sun Life Asset Management Company, CY2019, NSE Nifty Index, NSE Midcap Index, NSE Smallcap Index, Mahesh Patil, FPI, Reliance Industries, HDFC Bank, TCS, ICICI Bank, Kotak Mahindra Bank, Aditya Birla Sun Life AMC, Equity funds, A Balasubramanian, Systematic Investment Plan, SIP.In CY2019, NSE Nifty Index gained 13.4%, while NSE Midcap Index and NSE Smallcap Index were down by 3.7% and 9.2%, respectively. (Courtesy: PTI photo)

The equity markets yielded double-digit returns in calendar year 2019 in what was an extremely narrow rally driven by about half a dozen stocks. The return of foreign portfolio investors (FPIs) further fuelled the rally.

Aditya Birla Sun Life Asset Management Company (AMC) is of the view that 2020 could likely be a year of consolidation as the economy and earnings catch up with the markets and transition as the broader market starts participating.

In CY2019, NSE Nifty Index gained13.4%, while NSE Midcap Index and NSE Smallcap Index were down by 3.7% and 9.2%, respectively. Mahesh Patil, CIO – equity at Aditya Birla Sun Life AMC, said: “Expensive stocks have become more expensive leading to a divergence in the market. Also, mid- and small-cap earnings were downgraded. However, as the economy recovers, earnings growth of mid- and small-cap companies should also pick up as they have a higher linkage to the domestic economy. Risk-on sentiment globally should also lead to continuing FPI flows. Hence, while large caps should continue to do well, mid and smallcaps could catch up and their relative underperformance can reverse.”

We could see a transition from a narrow rally to broader market participation which provides an opportunity in the event of a convergence,” he added. In 2019, the rally in benchmark indices was led by stocks such as Reliance Industries, HDFC Bank, TCS, ICICI Bank and Kotak Mahindra Bank and among others. Aditya Birla Sun Life AMC also expects the flows into equity funds to further improve in 2020. A Balasubramanian, MD and CEO at Aditya Birla Sun Life AMC said: “With worst of economy behind us and past years returns looking better, we may see higher inflows through lump-sum and systematic investment plans (SIPs) in 2020.”

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