Indian markets have relatively outperformed. Going forward, a runaway rally in the Indian share market is unlikely, however, there is no major downside expected either, said Narendra Solanki, Head- Equity Research (Fundamental), Anand Rathi Shares & Stock Brokers in an interview with Harshita Tyagi of Financial Express.com. “The current 1-year target we have for Nifty 50 is 19,500 which was last updated in Oct-2022,” he said, adding that an investor should invest in a scattered manner in companies with strong financials and good growth prospects. IT, Tech, PSU, Manufacturing, and some Financial stocks look good in the near term, while Oil & Gas, Utilities, and Infra stocks look weak on a short-term basis, Solanki added.
Indian markets have outperformed developed, EM markets despite headwinds. Will this outperformance continue going forward?
Given the above backdrop, near-term markets look stable and a runaway rally is unlikely but a major downside or deterioration is also not on the cards. Coming to the outperformance, India continues to remain better placed among global economies due to a shift in policy approach towards boosting investment, demographics advantages, and the public digital infrastructure.
The outperformance of India’s economy not only depends on its own domestic factors but also due to the uncertainties in major countries which are confronting a unique mix of headwinds, including Russia’s invasion of Ukraine, interest rate increases to contain inflation, lingering pandemic effects such as China’s lockdowns, and disruptions in supply chains which are providing opportunities to Indian companies to gain market share.
IMF, World Bank, Moody’s have warned about recession and slowdown going forward. However, they have stated that India remains better placed. Do you agree with that assessment as well?
Yes, broadly agree and this has been the case not now but for the past few months as well.
India’s inflation is still above RBI’s threshold of 6%, trade, Current Account deficit data is scary. Amid all this, what is fuelling the market rally?
The October 2022 retail inflation at 6.8% reversed the spike of the previous month. Despite several upside risks and the unfavorable base for food and fuel, retail inflation seems to have passed the peak. A rapid cooling off is unlikely given the base and current momentum. With retail inflation above the RBI’s comfort zone, rate hikes would continue. Another 50-60 bps rate hike is still on the cards although a pause or a small hike is likely in the next policy.
Meanwhile, Indian markets continue to remain less volatile compared to its global peers as India’s domestic demand continues to remain resilient, helped by several steps taken by the government to boost consumption, as well as manufacturing, like the Production Linked Incentive (PLI) scheme, easing of FDI norms and China+1 which is also expected to boost domestic manufacturing. Despite quantitative tightening by the RBI, demand continues to remain resilient. Highest-ever monthly car sales amid the festive season are pointing towards the same, despite uncertain global macro factors now, which confirms positive bias about the Indian markets and economy.
Indian benchmark indices are at an all-time high, is it the right time to enter markets or should one wait for a correction? What is your Nifty50 target?
From a long to medium-term perspective, there is no perfect time so to say, as markets continuously discount future growth prospects and near-term events. An investor should invest in markets in a scattered manner in companies with strong financials and good growth prospects to cushion short-term volatility, and smoothly ride over near-term cycles. The current 1-year target we have for Nifty50 is 19,500 which was last updated in Oct-2022.
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What sectors or stocks should investors look at or avoid from a short-term investment perspective?
IT, Tech, PSU, Manufacturing, and some Financial stocks are looking good in the near term, while stocks in Oil & Gas, Utilities, and Infra look weak on a short-term basis.
(The stock recommendations in this story are by the respective research analyst. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)