Market Outlook for Financial Year'18-19 - Kotak Securities

Sandeep Chordia, Vice President, Research and Data Analytics at Kotak Securities

FY18 has largely been a very good year for the Equity markets as Sensex notched gains of 12%. For the fiscal, the Midcap and Small cap indices outperformed the Sensex and in terms of the sectors, the Realty index was a strong outperformer even as the Pharma sector was the one of the worst performing one, closing ~ 12% lower in the twelve month period. In addition to the foreign fund flows, the rally in Indian equities in FY18 has been led by strong liquidity support from the domestic investors. Domestic flows into mutual funds rose to ~ USD 20.5 bn in FY18 as compared to ~ USD 7.6 bn in FY17.

As we step into FY19, we see several headwinds like political uncertainties, rising bond yields, global trade issues, slowdown in foreign fund flows etc. Key trigger for Indian markets in FY19 could be political developments and outcome of large state elections like Karnataka, Rajasthan and Madhya Pradesh. Rising interest rates by Fed could disturb the FPI flows into emerging markets. In this background, India needs domestic flows led by SIPs to sustain in coming months. In our opinion, markets in FY19 are expected to be relatively more volatile than in FY18. Hence, we advise investors to increase allocation to large caps given the relative undervaluation compared to the mid and small cap space. Our preference would be for companies focused on Rural spending (Tractors, farm products), Travel/leisure and evergreen stocks (Consumer facing stocks)."

Source : Equity Bulls

Keywords