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From FY18 to FY20, there will be growth across sectors: Rajesh Kothari, AlfAccurate Advisors

2018 is going to be another good year for global and Indian equity markets, says Rajesh Kothari.

ET Now|
Updated: Jan 03, 2018, 07.27 PM IST
Rajesh Kothari
"There are a few sectors like technology or pharmaceuticals which from a low base may report better numbers. "
Talking to ET Now, Rajesh Kothari, AlfAccurate Advisors, says continuing to bet on the four themes of auto ancillaries, speciality chemicals, a few large consumer sectors and affordable housing as they have done for some time.

Edited excerpts:

What is your hypothesis for 2018 especially after the fact that we already have 30% gains on the benchmark index under the belt, almost 40-50% on the midcaps?
As you rightly mentioned, 2017 was a blockbuster year. It was a blockbuster year for global equity markets. If you look at the most indices they are up 20% to 35% in US dollar terms and it is up even for Nifty, like Nifty is up about 28% and midcap index is higher much more than Nifty. I believe that 2018 is going to be another good year for global markets and for Indian equity market as well because primarily, the growth globally is going to be better than 2017 and it is going to be across big economies whether it is US, Europe or Japan.

China, of course, is becoming more stable and of course India is going to grow faster than what we have seen in 2017. I believe 2018 is going to be an overall good year. Yes, there will be some volatility because of the oil price. This is one reason. The second reason can be the domestic political situation. These are a few of the reasons why market can be a little bit volatile in 2018 but overall, we are fairly positive on 2018.

Any particular sector that you think will lead from the front when it comes to earnings?
For next two years, probably it is going to be across sectors unlike last three to four years where it was driven by only two to three sectors. So, in FY18 as well as FY19 and probably even FY20, you will see growth across sectors. There are few sectors where base is in your favour. For example -- information technology or pharmaceutical and therefore from low base they may report little bit better numbers.

There are a few sectors which are growing even otherwise like for example private sector banking. There are few sectors where it was a very low base or was a loss-making kind of a sector like PSU banking. From losses, you will see the profit because of the lower provisions and the better quality of assets from here on. It is going to be more widespread and across the sectors, you will see better growth. Of course, few sectors will grow faster than the other sectors but overall it is going to be a reasonably widespread number.

That is a contra view? Most strategists are cautious about the year going ahead for markets. How are you positioning your portfolio this time? Have you made any changes? Where would your favourites lie in this market?
Coming to your first point, why we believe 2018 is going to be a good year is because ultimately it is earnings growth. Market is the mirror of earnings growth. In the last eight years, Sensex has delivered about 8% to 9% earnings growth and the market has also moved 8% to 9% in compounded terms.

Earnings growth and market go hand in hand. 2018 globally is going to be a good year from the economic growth perspective. Therefore, we believe that markets are also going to reflect the earnings growth momentum.

From the portfolio perspective, no major changes. We remain positive on those names and the few themes which we had to discuss at length during our previous conversation whether it is auto ancillary, speciality chemical, few large consumer sectors which are basically GST place, few sectors which are affordable housing themes. These are three-four themes on which we are fairly positive from last few quarters and a few we are holding from last few years. We continue to remain positive on those names.

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