October 19: There is a boom seen in global equity markets with Dow Jones Industrial Average breaching the 23000 level for the first time while Japan’s Nikkei rose to a 21 year high, South Korea’s KOSPI rose to a historical high this week.
Ahead of Diwali festivities and Samvat 2074 the BSE Sensex and Nifty had scaled record highs. On Thursday, there will only be one hour of Muharat trading in the evening in National Stock Exchange and Bombay Stock Exchange (BSE). This session is considered auspicious and expected to bring wealth and prosperity to traders all the year around.
Amidst this bullish scenario, Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, expects the bullish trend to continue as domestic investors are expected to give the much needed support aided by earnings growth.
Here is his brief outlook for Samvat 2074 he shared with Corporate Ethos:
#Markets are buoyant at the start of 2074. Do you see the trend continuing for the whole new year?
The bullish trend is likely to continue. The main factor driving the market is the humongous liquidity flows into the market from domestic investors. An important positive of these inflows is that a major part of that are coming via SIPs which are sticky and stable. This sustained flow from domestic investors will keep the market buoyant. However, an area of concern is the elevated valuations. Nifty is presently valued at 25 times trailing earnings. This is very high compared to the average of 18 since 1991. But valuations will become reasonable if earnings rise. 2018-19 is likely to witness a sharp upswing in earnings growth.
# In your view which are the sectors to focus on and which sectors to avoid?
Retail focussed private sector banks, NBFCs, metals, energy and autos will do well. However, these sectors are fully valued, perhaps even over valued from the short term perspective. For investment, it would be better to look at sectors quoting at low valuations. Here, IT and pharma qualify as good sectors to invest. Investors have to be careful in selecting stocks from these sectors.
#Do you see better opportunities for SME’s to perform well in the market?
There are very few SMEs in the listed space. But there are many small cap companies that are doing well.