First of all, a very happy Dhanteras to everyone. My parents have followed the tradition of buying a silver coin every Dhanteras, which I have followed till now and I hope my kids will do it as well. After all, that’s how we take our culture forward right?
If you are among those who don’t believe in buying gold or silver but financial assets like stocks, well today could be an auspicious day to make some purchases. The Indian market has endured a painful bear market but signs are that not only are we out of it, but we are at the cusp of a fresh bull market. Here are 13 reasons for the same
The government shows it cares. The big disillusionment that financial markets had till 3 months back was because of the perception (for right or wrong) that this government does not care about the stock markets. With the corporate tax cut, that perception has well and truly been negated. Expect more measures from the government.
There are clear signs of green shoots in the earnings: While it’s still early days and so far we have had results from frontbenchers which are normally good and the backbenchers are yet to deliver their results, the quality of earnings beat has enthused me. For me, topline growth is everything. Rest everything is accounting. Big companies like Asian Paints delivering double digit volume growth or companies like Bajaj and Hero handsomely beating estimates gives me some comfort.
The auto sector is showing signs of ending a prolonged bear market: Surprise, surprise, the biggest outperformer of last 2 months is autos. Stocks like Maruti, Hero, Bajaj and Eicher have not only managed 30-40 percent rally from lows, in certain cases they are very close to hitting 52-week highs. Eicher Motors did a smart thing by cutting prices and stimulating demand. After all, these companies enjoy huge margins. They can sacrifice some to get the growth back. There is still risk in this call, but looks like worst of autos is over.
Reliance is at the cusp of something big. The new age business of Reliance like retail and Jio have done phenomenally well and the company’s old businesses have also held forte. Reliance could become the first company to hit a market cap of Rs 10 lakh crore and signs are that a market cap of 13 lakh crore (50 percent rally from here) is also not out of imagination. Well, why 13? Because today is Dhanteras so that’s a fancy number to look at.
The market leadership is well and truly intact: Whether its HDFC Bank in banks, HDFC or Bajaj Finance in NBFCs, TCS in IT, HUL in FMCG – the trend is clear, the big is becoming bigger and that only means one thing – surge in Sensex and Nifty. After all, a 5 percent move in TCS or HDFC Bank matters more than a 20 percent move in, say an NIIT Tech or RBL Bank
The FIIs are back. Yes, they deserted us for greener pastures for the better part of the year have made a stunning comeback. Better late than never I say. Since October 10, FIIs have pumped in roughly Rs 3000 crore – not a huge sum but still it’s a departure from the selling they have done through the year. Let’s hope the dollars keep coming.
The domestic investor’s faith in equities is well and truly intact. While the market still remains vulnerable to the FII selling, it’s the domestic liquidity which has provided us comfort at our worst times and with interest rates continuing to go down and real estate still out of reach, stocks look like the best bet for retail and mutual funds the preferred route.
The market will have to factor in a complete political stability for almost 4-5 years. There is a good chance that by the start of 2020, the NDA will have a simple majority in Rajya Sabha. It already has a majority in Lok Sabha and while the recent minor setback of Haryana notwithstanding, the polity of this country is now stable for the foreseeable future. That takes care of a major risk.
The US and China will hopefully and finally stitch a deal. There is much bigger politics involved here, of course, but ultimately it’s the business sense that should prevail and it’s in the interest of both the US and China to seal the deal. And hey, in case there is no deal, it opens possibility for India to gain at the expense of China.
The broader market is finally showing some life: The Nifty Junior as I write this is within 2 percent of a 52-week high. For me this is the index to track for mapping the health of the broader market. This is one part of the market which has absorbed maximum pain and as it happens with most cycles, the cleanup exercise might be over. And you really have to be bullish on broader market from current levels.
There is hope that the consumers will have more money in their pocket. All signs point to a potential personal income tax cuts between now and budget and take my word for it, the market will hit a new high within 3 days of that being announced. There are some anecdote which are never wrong about market and this is one of those.
The worst of the NBFC and financial crisis is behind us. That’s the takeaway of our interview with the big bull Rakesh Jhunjhunwala. The hope is that the NPA crisis is now over and the risk of retail NPAs perhaps being overstated.
And the best for the last. This market is showing the same trends both technically and fundamentally that it showed before the start of India’s biggest bull market of 2003-2008. A lot of pessimism, broken sentiment, midcap mayhem, general disenchantment with markets. But like we saw in 2003, when the market sensed the earnings were reviving, there was no looking back, this time as well the market is hinting that the worst of earnings downgrade is behind us.
First Published: Oct 25, 2019 12:30 PM IST