By Gaurav Garg
Nifty 50 has toppled around 3%, last week, from all-time highs which should be considered a healthy correction. In bull markets like these, a 3-5% correction is healthy for the long-term uptrend of the market. I expect the markets to be sideways in the coming few weeks with negative bias. However, Bank Nifty might perform well in the coming weeks as it has settled well above 40,000. Also, the quarterly results by leading banks look impressive which should provide good momentum to Bank Nifty. I am expecting Bank Nifty to cross the 42,000 mark before this Diwali. We have seen profit booking in selective tech stocks, auto sector and metal counters. Long-term investors should consider any such opportunity to accumulate quality mid-caps and large caps to their portfolio.
Samvat 2078 is going to be promising as Indian indices have seen a spectacular bull run in the last year from Diwali 2020 to Diwali 2021, Nifty 50 has gained about 42% in a V-shaped recovery. Economic activities have gathered good momentum after the deadly 2nd COVID wave hit the country hard. From there on, the vaccination drive has picked up a very good pace and most of the sectors have recovered and got back to their pre-COVID levels. The same was reflected in the stellar performance in broader indices as well as mid-caps and small caps came out of under-performance after a 3-year long stretch.
If we talk about primary markets, Samvat 2077 was a year of IPOs. Tatva Chintan Pharma, Dodla Dairy, Railel, Indigo Paints, Mtar Technology, G R Infrastructure, Clean Science and Technology, Paras Defense and Space Technology, were among the top-performing IPOs. For the next Samvat many IPOs are ready to hit primary markets which include Nykaa, NSE, LIC, Paytm, Policybazaar, Mobikwik etc.
The outlook looks positive for indices as a lower interest regime which will spur ample liquidity in our financial system. From here on, we might witness a rally in banking stocks and the same might outperform other sectors. Affordable housing space might play an important role as a lower interest rate regime will fuel the demand during the festive season. We might see traction in PSEs as valuation catch-up rally may be witnessed. Investors can pick selective PSEs especially from Power, Railways and Oil & Gas space which are looking attractive from a mid-to-long-term perspective. For the next year, railways PSE stocks namely RITES, RVNL, IRCON, RailTel can be a pocket where investors should look for buying opportunities in any healthy correction. Sectors, where pressure might be seen, includes FMCG where volumes were on a muted side so we might see some pressure on margins.
As India crossed 100 Cr vaccinations, India Inc. looks to be back on track with full force as most of the sectors are at pre-pandemic levels. We can witness markets to perform well with lesser volatility as compared to what we have seen in last year.
Talking about headwinds for the equity markets include higher crude oil prices, Strong Dollar Index which might put pressure on rupee which might slide towards 76.
(Gaurav Garg, Head of Research, CapitalVia Global Research. Views expressed are the author’s own.)