elections 2014- market predictions
TRANSCRIPT
Elections 2014 - Market Predictions
Pre-elections market scenario
C• In the last 3 months, benchmark indices has given more than 14% returns
and individual stocks have returned much more.
• There have been positives in the form of a better CAD situation, a
stronger / stable rupee, some reform initiatives from the Government,
etc.
• However, the most important trigger has been the expectations from the
election process. In the short term, markets will react to the expectations
on election results and also the actual results.
Views on post elections scenario
• Markets will start factoring in the potential growth rates, valuations,
monsoons, global developments, etc. most of these factors are not
exactly supportive right now.
• Sensex valuations, at about 15x consensus earnings, are not exactly cheap.
Also, with the major event out of the way, some participants may look at
taking out the significant profits they would have made. This may result in
profit booking
• In the long – term, markets will move depending on the economic policies
of the next Government as well as the RBI moves on interest rates.
Dealing with volatility
• Stay positioned to make the most out of the uptrend which may continue
post the election results.
• However, on the other hand, one should be able to protect his/her
portfolio in case the political outcome is not to the market’s liking or if
there is a correction in the market.
• Investment Recommendations:
1) Adequate exposure to the export-oriented themes as well as some of the
defensive stocks.
2) Favourable exposure to good quality stocks in cyclical and
investment-oriented domestic sectors is recommended.
• In case there is a fractured mandate, the markets will turn to export-
oriented and defensive sectors.
• The rupee may depreciate, which may be positive for export-oriented
stocks
Expected market scenario
Public sector banks and infrastructure• A selective approach is recommended for these sectors. Private sector
banks are preferred over PSU banks on the back of better asset quality,
relatively lower requirement of additional capital, higher exposure to retail
loans, etc.
• For the infrastructure sector, Companies having credible managements
and strong balance sheets are preferred. They will be in a better position
to bid for projects over the medium term, based on their better balance
sheets.
Sectors expected to perform in 1-2years• Assuming a stable government at the centre, domestic cyclical and
infrastructure related sectors will out-perform.
• Select export oriented companies may also perform well due to the
improved demand scenario in developed economies.
• However, if the election results are not to the market’s liking, defensives
and export-oriented sectors are likely to outperform.
Review on the 4Q earnings results • 4Q results have been largely in line or marginally better, subject to some
exceptions.
• There have been good results from most companies in sectors like
Logistics, Banks, IT, etc.
• With revenue growth not picking up, domestic companies have improved
efficiency levels and cut costs.
• These have led to an improvement in margins for several companies and
this bodes well for the future quarters.
Advice to the retail investor• Don’t get carried away by the sharp moves which have already happened in
the markets.
• At the high levels, one should be very selective and put money gradually,
with a medium-long term perspective, into stocks which have sound
fundamentals and credible managements.
• Reasonable valuations will be an added advantage.
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