Madhusudan Kela
Chief Investment Strategist
Reliance Capital
Post budget, the market rallied from 6,850 points on the National Stock Exchange's Nifty index to above 7,500, backed by foreign fund inflows. Madhusudan Kela, chief investment strategist at Reliance Capital,believes the worst seems to be over.
The market seems to have put a bottom in place for 2016-17 at around 6,800-6,900 and it is unlikely that these levels will be breached. However, with the global environment still fragile it is also likely for market to see another down-leg later in the year.
The data for auto sales and cement sales for the month of March is pointing out to the stability in the market. On the domestic front, worries have receded significantly. However, the global environment is still fragile and there can be a possibility of another leg down due to global factors
The earnings have been disappointing for last 8-10 quarters. Every year in the beginning it is the expectation is to grow 18-20% There are some sectors which are even expected to grow 30-40% in this year because of the low base of last year. As the base is low, there is already some kind of a revival in some of the sectors and the companies are sounding more positive and constructive.
In this current quarter there will be challenges in some of the public sector banks results and other stressed company results. However, the overall weightage of the stressed sectors disappointing the markets has significantly come down. All stressed sectors and companies put together only constitute may be 15% of the overall Sensex weightage. It doesn’t matter if the stress marginally continues.
The worst has gone and maybe some kind of a bottom for 2016-2017 has been put in place. That 6,800-6,900 looks very difficult to get penetrated, unless and until there is some real bad global chaos. All this clean-up which has happened had its own toll on the domestic earnings and on the domestic recovery. So, even with global turbulence, the domestic factors are looking far more constructive and far more positive. In a situation which is visible today, it is very difficult to see penetration of 6,800 in this year.
In March a lot of the foreign institutional investor (FII) money has come back to India but this is more allocation money and appears that not many India funds have got this money. This looks like a larger global emerging market call, and within that, India's position is clearly more superior. Also with the correction which we saw, all these factors have come together for this money to be poured into India.
* As told to Mint Apr 05, 2016