For those cheering Sensex’s and Nifty’s 27%-28% returns so far in the current year 2017, there is more good news: the headline indices may return a further 20% gain in the next year 2018 too, riding on the back of growing corporate revenues and profitability, renowned investment advisor Sandip Sabharwal says. Given a pick up in both consumer sentiment as well as demand led by infrastructure investments, 2018 should be very good for both topline and profit growth, Sandip Sabharwal of asksandipsabharwal.com tells FE Online in an interview, while sharing his outlook on the Indian economy. “2018 will be a good year for risk assets globally driven by strong economic recovery, sufficient liquidity as well as contained inflation,” Sandip Sabharwal says.
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“In the Indian context I expect 2018 to deliver a 20% return on the headline indices…” he says. What’s more, select stock picking is expected to do even better, beating the anticipated 20% headline returns, Sandip Sabharwal adds.
Sharing his market strategy, the investment advisor suggests the long-term investors remain invested. “Those on the sidelines should use 5-7% kind of corrections to invest in the markets. Overall 4-5 years still look good,” Sandip Sabharwal says. For the next year 2018, he is buoyant on infrastructure and construction stocks, companies focussed on the rural economy and select commodity stocks. Further, he expects the automobile stocks to continue to do well next year. However, he expects pharmaceuticals and technology stocks to remain underperformers in 2018.
Here are the edited excerpts of Sandip Sabharwal’s interview with Ashish Pandey of FE Online:
Q. Do you think the latest rating rejig by Moody’s helped the market sentiment?
Market Sentiment was bullish even before Moody’s upgrade. Where the upgrade has had the most impact has been on the currency where the INR has been very strong despite the gyrations in the equity markets, a high trade deficit as well as the rise in debt market yields. Overall directionally Moody’s upgrade is a positive for fundraising at finer costs for Indian banks and corporates and will be especially useful when the corporate investment cycle picks up.
Q. September quarter witnessed higher than expected results. Does it mark the reversal of downward trend observed in the last five quarters?
For sure the September quarter results mark a turnaround in corporate profitability and growth. Given the revision in GST rates as well as a pick up in both consumer as well as demand led by infrastructure investments 2018 should be very good for the growth of both topline and profits. We are likely to see double-digit growth on both fronts going forward. Operating leverage should lead to better profitability growth across the board next year.
Q. How do you see the markets behaving in the December series?
December is seasonally a strong month for equities. Markets broadly move up by 2-3% in general. As such, there is no reason to believe that the same will not be repeated even this December. An inline forecast by the US Federal Reserve will be bullish in general. We could see greater volatility if they are more hawkish which looks unlikely at this stage.
Q. Which stocks do you think can be traded with a positive bias? What do the monthly and weekly market charts indicate?
I am not a technical chartist so it is difficult for me to comment based on charts. However directionally I believe that the next year will be good for Infrastructure and Construction companies, companies focussed on the rural economy and select commodity stocks. Automobile sector should continue to do well. Underperformers should be Pharmaceuticals and Technology.
Q. Share your outlook on the Indian markets in 2018? Do you believe that better than expected September quarter earnings will guide the market positively in December?
2018 will be a good year for risk assets globally driven by strong economic recovery, sufficient liquidity as well as contained inflation. In the Indian context, I expect 2018 to deliver a 20% return on the headline indices with stock picking doing better.
Q. What is your strategy for the investors?
Long Term investors should remain invested. Those on the sidelines should use 5-7% kind of corrections to invest in the markets. Overall 4-5 years still look good and we will revisit the thesis at that stage.