KAL, AAJ AUR KAL... THE YEAR THAT WAS... MARKETS WAITING FOR AN ENCORE: Angel Broking

Views of Mr. Mayuresh Joshi (Fund Manager, Angel Broking):

"The Indian Equity markets have had a eventful 2017. The key indices i.e. the Nifty and the Sensex have delivered returns to the tune of 18.55% and 16.88% over the past one year. One might argue how rich valuations are appearing at this juncture and how markets bounced back though all the global events that turned against market expectations (The BREXIT vote, Trump appearing victorious in the US presidential elections, The Yuan volatility, the actions that the Federal Reserve undertook in terms of rate hikes, softness in the EU zone, weak global trade data), but here we are still towering higher than what we stepped into the beginning of the financial year. We have seen volatility in the bond yields as well both in the 10 yr paper in India as well as the movement of the US yields with sharp movements across the year on either side of the Interest curve. Metals had a fantastic year with almost all metal stocks whether ferrous or non-ferrous performing exceedingly well. Oil Marketing companies continued their good run and the Banking and financial space especially the large retail oriented private ones and selectively within the public universe performed exceedingly well. Mid caps had a phenomenal year and lot of stocks across varied industries gave stupendous returns. IT and Pharma stocks took a earnings hit for headwinds faced respectively of what might come through from trump policies as well as FDA issues plaguing the Pharma industry in general, though few stocks from these spaces did do well. Telecom got hit as Reliance JIO got launched and the freebie period ensured them the subscriber base and announcement of their data packs and pricing plans has caused tremendous upheaval and distortions in the margins and pricing environment that the existing incumbents were enjoying. Capital goods were laggards as the capex cycle on the private side did not meaningfully pick up and it was clearly getting reflected in their financial statements causing return ratios to dwindle down. Where are we placed as we head into the next financial year. The markets post the saga of demonetisation and remonetisation are now looking for earnings recovery and as discretionary demand returns back with money supply getting normalized, it is a matter of time the consumption activity picks up. On the Industrial capex, broad expectations are that the cyclical recovery should start emanating at the end of this financial year and this shall lay base for a strong case of earnings recovery in the second half. Secondly, Implementation of GST in the second quarter of this fiscal shall have profound implications in the way the business gets conducted especially by the orgnaized players and listed players in particular and we are bound to see a paradigm shift in consumption patterns getting shifted to organized players as the price difference over the next few months might not exist throwing out a lot of the unorganized players. So domestic consumption along with cyclical is something to bet on over the next 15-18 months. Consumption can be pretty large, so autos, auto ancillaries, consumer staples, selective FMCG companies, rural focussed NBFC's/Microfinance companies, Housing finance companies, Large private sector banks/Selective large public sector banks, power transmission companies/power transformer companies, selective road developers/EPC players, selective cement companies can be looked at on a holistic basis. So, here's hoping that the next financial year delivers bountiful returns and wishing happy and successful investing to all."

Source : Equity Bulls

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