Samvat 2075, the traditional Hindu accounting year which starts from Diwali, is likely to be a tumultuous one for the Indian equity market with the possibility of a potentially game-changing general election outcome in Spring, 2019.
And then, there will be Brexit, further tightening by global central banks and uncertainty over crude and currency, and credit market issues back home. A slippage in the governments fiscal discipline is another major worry.
But at least 12 of 20 top money managers on Dalal Street, who participated in the Diwali Survey of ETMarkets.com, hope to see the Sensex much higher by next Diwali, with some projections going up to 40,000-45,000 levels.
The survey was conducted among money managers at brokerages, mutual funds, insurance companies and private equity firms. Six participants from Anand Rathi, Motilal Oswal Financial Services, TIW Private Equity, Sharekhan, SBI Life and Centrum didnt set any target for Sensex and Nifty.
Most said the market will hit new highs over the next 12 months, while four felt Sensex and Nifty would be either at the same level or go lower by next Diwali.
The average projection for Nifty target by next Diwali came in at 11,755. The 50-share index hovered around the 10,550 mark on Tuesday.
The bullish argument is largely based on projections of the Modi governments return to power with a solid majority.
Naveen Kulkarni, Head of Research at Reliance Securities, is looking at a target of 12,000 for Nifty and 42,000 for Sensex by next Diwali.
“The general elections will decide the course for the market in the medium term. A stable government led by single party majority is the best case, while a fragmented coalition will be the worst case scenario. But more than elections, earnings will be a key driver. Apart from these, a rupee appreciation and fall in crude oil prices should surprise the market positively,” he said.
Nitasha Shankar, Executive Vice President – Research, YES Securities, who projected her Sensex target at 30,700 and Nifty nears 10,000 in one year, cited elections, rupee and crude oil as key risks.
She said from an investment perspective, sectors linked directly and indirectly with domestic consumption, affordable housing, IT and pharma should do well over the next one year. Oil and gas, PSU banks and NBFCs would lag.
Political uncertainty due to lack of clarity about the outcome of 2019 elections was the overarching concern for all analysts, as was a major spike in oil price, which some see beyond $100 a barrel in a few months.
Possibility of restrictive trade barriers against Indias export of IT services to the US, a likely slippage in Indias fiscal deficit and ballooning current account deficit were other key concerns.
VK Sharma, Head of PCG and Capital Market Strategy at HDFC Securities, who projected Nifty at 12,800 by next Diwali, cited trade wars concerns, China slowdown and currency weakness following yuan devaluation as key risks for India equities.
A sharp rise in the governments unbudgeted expenditure in the runup to the general elections is expected to put pressure on domestic bonds, causing the equity market to slide, some feel.
“The general elections will be a make or break deal for the market. Things are not as certain as they were during the 2014 elections. Our base case is of a stable coalition led by the BJP coming to power,” said Vivek Ranjan Misra, Head of Fundamental Research at Karvy Stock Broking.
He said the best case would be if a single party secures a majority, as it would raise hope for economic reforms, this could trigger a rally in the market. The worst case would be an unstable coalition coming to power, but this is a low probability event.
Vinod Nair, Head of Research, Geojit Financial Services, has a neutral view the market for next one year, with a forward base-target of 10,250 for Nifty50 (by next Diwali), which has come down from 10,400 in Q1FY19.