After the Indian equity indices had a fabulous run in the preceding calendar year, global research firm Macquarie expects the equity markets to be more measured in 2018. The firm is bullish on infra, rural and GST related themes in 2018.
After the Indian equity indices had a fabulous run in the preceding calendar year, global research firm Macquarie expects the equity markets to be more measured in 2018. “We believe that the market has been going up driven by very strong liquidity and a very strong tailwind from a global equity markets. 2018 will see the focus come back on earnings. There would be large political events lined up in India. The big general elections in March 2019. Given all that, we expect 2018 to be much more measured,” Inderjeet Singh Bhatia of Macquarie Capital told ET Now. Inderjeet Singh said that valuations appear to be stretched at current levels. “With valuations creeping closer to 19 times one year forward, the stock picking is going to be very, very difficult. The good quality names are coming at very high valuations and maybe there is cheaper valuations only in type of stocks which one does not want to invest in,” he told the channel.
Sharing the outlook markets, and the firm’s top bets, he said, “The three themes that I talked about earlier are infra, the rural side and the third is the GST kind of a theme. Within the rural side, the exposures through either the companies which are exposed on the financing side or on the equipment side or even on the broader consumption pattern side may be two wheelers which are more focussed on rural side. Those could be a good way to play the entire rural theme.”
Inderjeet Singh Bhatia said that NBFC space looks a bit stretched at current levels. “One particular area where we are more concerned clearly is NBFCs. Given the way, lending has grown in the broader NBFC space there could be some strains emerging if the economy does not improve significantly because we still have very weak job growth.”
The expert also shared his outlook in the private bank space. “We are still very much focussed in terms of our outperformed calls on the private banks. We believe despite PSU banks getting recapitalised, they are still going to see market share to the private banks. Even if the system growth does not improve dramatically, the private banks will sustain higher growth while maintaining fairly decent standards on their quality of books. So, we want to be in private banks despite being expensive,” he told the channel.