The outcome of the forthcoming general elections will be the key factor influencing the equity market in 2019 and if a stable government comes to power it can lift the Nifty up to 13,000 levels, a brokerage said Thursday. If the the hustings throw up a fractured mandate, the Nifty can go down to 10,000 as well, Kotak Securities said. Its managing director and chief executive Kamlesh Rao said which party comes to power is not very important but what’s important is that the next government should have a clear majority.
“If the election outcome is negative, the Nifty can go down to 10,000-10,500, but a positive outcome can take it to 12,500-13,000 points by December 2019,” he told reporters. He, however, sought to dispel concerns over valuation, saying the downside even in the case of a fractured mandate is not very large and the market will go down by only by around 700 points from the current levels. Rao justified the recent correction in small and mid-caps and said there is a scope for more repricing in them. But he was quick to add that the benchmark Nifty is not over-priced now.
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Global events that will have an impact on the domestic market are the rate actions by the US Fed, the outcome of the Brexit, and trade wars, he said. However, the brokerage played down the impacts of the outcome of the assembly polls in MP, Chhattisgarh, Rajasthan, Telengana and Mizoram, which will be announced Tuesday next, saying it will not have as much of an impact as the hustings slated for April-May and that if at all it goes against the ruling party, things will settle down in the 10-15 days.
Many analysts are of the view that the BJP will fare will badly at least in Rajasthan and MP.While MP, Chhattisgrah and Mizoram have already gone to the polling booths, Rajasthan and Telengana are voting Friday. One of the biggest positives for the markets, even as foreign investors have been net sellers during the year, is the continued resilience of mutual fund inflows, Rao said. He called for a Jan Dhan Yojana-type drive to increase the number of demat accounts to at least 100 million from the present 35 million.
Rao also said the ban on using the Aadhaar for opening accounts has become a big hindrance, increasing the time taken to 3 days from 20 minutes before the Supreme Court ban. When asked about discount brokerages, he said one or two of them have created a niche for themselves and that bigger institutions like them have to be ready to face more such disruptions. The brokerage is positive on auto, auto ancillaries, private sector banks, building materials, construction and information technology sectors.