AI Stock Hits Upper Circuit After Being Valued 44% Higher Than Its Market Cap
In the last year, we faced a number of diverse and significant changes in the globa/Indian economy & financial markets. In Indian context major stories came from US Dollar, GST, Oil & tumbling of Indian stock market.
As 2015 is coming to an end, we asked 6 of our most popular contributors for their strategies for the coming year. We received exciting mix of views and have prepared this article.
Abhishek Parakh- Outlook For Financial Markets In Year 2016
Indian stock market will likely to outperform other Emerging Markets. Nifty 50 likely to cross 9000 level backed by key financial reforms. Indian markets will deliver 15% plus return in the year 2016. Best sectors to buy are capital good and Infrastructure.
For International markets, US will leader again in all developed markets and we are expecting a return of 5-8% in US Markets in the year 2016.
In commodity, we would be buyers in gold and crude whereas sellers in silver. Metals downtrend will likely to be captured somewhere by the middle of the year 2016. For the second half, we would go long in all metals.
In currency space, Dollar will be the strongest currency and will continue its bull run same as that of the year 2015. However, Indian Rupee would outperform Dollar index w.r.t other currencies and Rupee range will be seen between 63-69 v/s Dollar.
Punit Jain Structural Reforms To Continue In India, Capex Cycle To Revive
US Fed to start raising interest rates. The US Fed has to get off the floor in terms of interest rates and try to restore normalcy in its outstanding debts, asset prices and liquidity. Painful but necessary.
Crude Oil prices to stay depressed. Crude oil production is not slowing down. OPEC is happy to boost volumes. On the other hand, growth in the economies of Europe, Japan and China are flat or worse. The surprise may be renewable, where new power generation capacities may match fossil fuels in terms of (unsubsidized) power costs, crossing an economic tipping point.
Sectors such as paint, tyres, FMCG, airlines and lubricants are gaining from lower costs. Indian Oil (NS:IOC) and Gas - Exploration and Production firms will need to get used to lower profits.
GST to see the light of day but in a diluted, trial fashion. After a decade of parry and thrust, the lawmakers may have to bow to the inevitable. GST should roll out in 2016. However, it will have to be introduced in a calibrated fashion so that States are able to handle the losses & gains across sectors. We feel that FMCG, pharma, power sector, logistics and auto & auto ancillaries would be the sector gainers from GST implementation.
Structural reforms to continue in India, capex cycle to revive. The fall in costs across crude, fuels, metals and agro-commodities will continue to boost the economy for 2-3 years. Flush with both funds and purpose, the Govt. of India will spend its way out of slow growth. Subsidies and inefficient expenditures may reduce while investments in infrastructure, urban development, transportation and government reform look likely. In the private sector, our positive sectors are infrastructure, capital goods, consumption, pharma, exports, IT, textiles, autos and auto ancillary.
Several profitable PSUs will also be operationally freed up, and even undergo disinvestment. The dynamic firms in BFSI will gain a lot, but others will weaken and see some M&A.
India to continue as an emerging markets leader. With some financial stability controlled by a visionary RBI, India could top growth rates among large and emerging economies for many years. The current economic cycle uptick will also attract global funds.
In the telecom sector, the Reliance Jio launch will see incumbents face off with this new player. The sectors to avoid are Oil & Gas (E&P), metals and telecom. The real estate industry may grow even as prices remain depressed.
Parindu Patel DJIA Is Marching Northwards Towards Making A New High
Before we take a step ahead and enter into the new year, let us take one back and revisit one of the oldest theories of Technical Analysis, the Dow Theory. One of the tenets of Dow Theory proposed by Charles H. Dow suggests that the averages, namely the Dow Jones Industrial Average (DJIA) and Dow Jones Transportation Average (DJTA), must “confirm”.
Since the 2009 bottom, the DJIA and the DJTA have been in sync making highs and lows at the same time. There was a brief period in the second half of 2012 when the DJTA lagged the DJIA, thereby indicating a possibility of non-confirmation. Though late to join the party, the DJTA did not disappoint. Entering into 2013, the DJTA resumed its uptrend thereby confirming the uptrend in DJIA.
As we are moving into 2016, the DJIA is marching northwards towards making a new high but the DJTA is exhibiting a similar lag in moving up along with the DJIA. Will the DJIA make a new high? Will that high be “confirmed” by a new high in DJTA? Or will this weakness in DJTA prove to be a precursor to the weakness in DJIA?? One must keep these questions of utmost importance handy as the market will chart out the answers in the year coming up.
Krishna Bagera Govt. Reforms Could Slow Market Rally
Just as 2015 comes to an end, it presents a platform to pause for a moment and recollect thoughts about what worked in the year. It wouldn't be a stretch to say that 2015 was a year of disappointment and dashed expectations. Lots of the positivity around the Modi government wanted during the year as it became clear that the political opposition he faces is quite strong. This theme is unlikely to wane anytime soon and if BJP's performance in Bihar elections is any indication, the government will not get any more mileage in future state elections. This will mean more compromises on key reforms and by extension, less room for a stock market rally.
This indicates a painfully slow recovery for stocks in capital investment, real estate, infrastructure etc. A silver lining for India has been the soft crude oil prices which could spring a surprise going forward. As a result, oversold upstream stocks like ONGC, Oil India (NS:OILI), Cairn India (NS:CAIL) may turn out to be black horses. Coinciding with the correction in oil prices is the interest rate reversal cycle. As a result of falling interest rates, consumption-focused and interest rate sensitives is going to be another theme preferred by investors. We are talking about the likes of Asian Paints (NS:ASPN), LIC Housing Finance, Bajaj Finserv (NS:BJFS) here.
Nishit Vadhavkar 2016 Will Be The Year Of India
With low commodity prices globally, India will get the raw materials cheap for the Make In India Program. India, being a crude oil importer with almost 80 pc of crude imported, will have a lower fiscal deficit. Lower steel prices will further help in infrastructure development at optimal costs. Domestically, good governance with transparent auctions of Coal, Spectrum the roadblocks to doing business in India have been removed. India will have the highest GDP growth rate amongst key economies of the world, coupled with a falling interest rate regime, low inflation, aspirational middle class, we have a perfect recipe for markets to take off. Sectors I am most bullish on are Capital Goods, Private Banks, Defence and Power Sectors. Low commodity prices, good governance coupled with Managements with high Integrity in the sectors mentioned above will lead to winners in one's portfolio.
Asis Ghosh- Whatever It Takes Draghi
We are approaching the all important Fed day (Dec-16) after ECB failed to stimulate the market as expected. Draghi came with a "water pistol" instead of a "Bazooka", but the market doesn't underestimate (fade) "Mario whatever it takes Draghi" so easily and the last Friday's NY Q&A session is an example of Draghi's jawbone (verbal intervention power).Similarly, after months/years of verbal intervention, Fed now seems to be determined to act this time as they don't want to fall behind the inflation curve (although inflation in us is around 1.3%, nowhere near the Fed's target of 2%; but Fed is anticipating higher core inflation in the years ahead on the back of increasing current wage inflation trend despite tepid commodity prices).
Similarly, after months/years of verbal intervention, Fed now seems to be determined to act this time as they don't want to fall behind the inflation curve (although inflation in us is around 1.3%, nowhere near the Fed's target of 2%; but Fed is anticipating higher core inflation in the years ahead on the back of increasing current wage inflation trend despite tepid commodity prices).
There is no doubt that US economy is progressing quite well in the job market which is creating nearly 200 k jobs every month on an average with the current unemployment rate of around 5%. At this rate, the unemployment rate may fall to 4% in 2016 in the US !!.But the manufacturing & trade data in the US is quite sluggish and the ISM surveys indicate the 2009 pre-recession like conditions. Due to very strong USD and apparently sluggish internal real economy (as an increase in inventory suggests), both exports & imports are suffering in the US.
But the manufacturing & trade data in the US is quite sluggish and the ISM surveys indicate the 2009 pre-recession like conditions. Due to very strong USD and apparently sluggish internal real economy (as an increase in inventory suggests), both exports & imports are suffering in the US.Another factor is that a relatively strong currency (USD) is equivalent to hike in the real rate of interest in an economy itself (1% strength in currency may be equivalent to 0.25% of rate hike).
Another factor is that a relatively strong currency (USD) is equivalent to hike in the real rate of interest in an economy itself (1% strength in currency may be equivalent to 0.25% of rate hike).
Thus keeping in mind all the factors, as par text book economy, Fed might go in for a 0.25-0.50% rate hike on Dec-16th to balance everything (as Fed's inability to act this time may be also interpreted as their lack of confidence on US & global/China economy and market may be again sold off).FFR is also indicating a probability of above 78% for a rate hike this time and barring some unexpected geopolitical factors and financial market dooms day (like sudden China crash etc), Fed is likely to go for a "one & off" rate hike this time (0.25-0.50% by Dec'15 & Apr'16).
FFR is also indicating a probability of above 78% for rate hike this time and barring some unexpected geopolitical factors and financial market doomsday (like sudden China crash etc), Fed is likely to go for a "one & off" rate hike this time (0.25-0.50% by Dec'15 & Apr'16). Fed may not be ultra-hawkish to increase rate @0.25% in every bi-monthly meet to go for a 1.25-1.50% FFR by Dec'2016 as recovery in US economy is still fragile. Moreover, in the 2016 US election year, Fed may not choose to experiment too much risking to destabilize the financial market. Thus keeping the Wall street in a stable condition, Fed/US Govt might go for some structurally targeted mini-stimulus in different QQE forms or even putting some sort of negative interest rate intended for the Main street in 2016.
Fed may not be ultra-hawkish to increase rate @0.25% in every bi-monthly meet to go for a 1.25-1.50% FFR by Dec'2016 as the recovery in US economy is still fragile. Moreover, in the 2016 US election year, Fed may not choose to experiment too much risking to destabilize the financial market. Thus keeping the Wall street in a stable condition, Fed/US Govt might go for some structural targeted mini-stimulus in different QQE forms or even putting some sort of negative interest rate intended for the Main street in 2016. Due to the Dec year end factor, Fed may not choose to act in this time of "Santa Claus" and instead, give an indication that they will start to act from early next year (Feb'16).
Due to the Dec year end factor, Fed may not choose to act in this time of "Santa Claus" and instead, give an indication that they will start to act from early next year (Feb'16). As the above likely Fed stance (0.25-0.50% one & off token rate hike by Dec'15 or Feb-Apr'16) is already being discounted by the market to a great extent, the overall market reaction may be within a defined range except some whipsaw movements for a day/two. If the Fed indicates that they are going to hike in every/alternate bi-monthly meet for an FFR target of 1.25-1.50% by Dec'2016, then expect some volatile market in 2016.
As the above likely Fed stance (0.25-0.50% one & off token rate hike by Dec'15 or Feb-Apr'16) is already being discounted by the market to a great extent, the overall market reaction may be within a defined range except some whipsaw movements for a day/two. If the Fed indicates that they are going to hike in every/alternate bi-monthly meet for an FFR target of 1.25-1.50% by Dec'2016, then expect some volatile market in 2016.Fed may also keep in mind the policy divergence between it & ECB. Also, a continuous stance of QQE by BOJ and PBOC are making USD stronger.
Fed may also keep in mind the policy divergence between it & ECB. Also, continuous stance of QQE by BOJ and PBOC are making USD more stronger.Even if Fed decides to go for a hike, there will be no dearth of liquidity because of a continuous accommodative stance of other three major central bankers of the world. The four major pillars of our global economy (FED/ECB/BOJ/PBOC) will not let to happen a "dooms day" for the global financial market under any circumstances unlike in 2008 "Lehman Crisis".
Even if Fed decides to go for a hike, there will be no dearth of liquidity because of a continuous accommodative stance of other three major central bankers of the world. The four major pillars of our global economy (FED/ECB/BOJ/PBOC) will not let to happen a "doomsday" for the global financial market under any circumstances unlike in 2008 "Lehman Crisis". India, as an EM is a "bright spot" due to its 4-D (democracy/demography/demand/deregulation) appeal. Due to the expected transmission of lower rates, tepid commodity prices and better operating leverages we may see incremental better earnings/margin expansions in the quarters ahead. Implementation of GST and other reforms will also likely to take effect after 2-3 years in the earnings.
India, as an EM is a "bright spot" due to its 4-D (democracy/demography/demand/deregulation) appeal. Due to the expected transmission of lower rates, tepid commodity prices and better operating leverages we may see incremental better earnings/margin expansions in the quarters ahead. Implementation of GST and other reforms will also likely to take effect after 2-3 years in the earnings.Traditionally, Indian consumer demand is largely over dependent on so-called "Black/unaccounted" money. The present transformation of the economy towards "White/clean/accounted" money is taking its time and that may be one of the reasons of the tepid earnings despite better-operating leverages.
Traditionally, Indian consumer demand is largely over dependent on so-called "Black/unaccounted" money. The present transformation of the economy towards "White/clean/accounted" money is taking its time and that may be one of the reasons of the tepid earnings despite better-operating leverages. Going forward, once this transformation is complete, we may see better consumer demands and earnings by FY-17-19 and by that time, NPL/NPA situations in Indian banking system may also be improved significantly.
Going forward, once this transformation is complete, we may see better consumer demands and earnings by FY-17-19 and by that time, NPL/NPA situations in Indian banking system may also be improved significantly.
Looking at the technical chart, expected Nifty range may be 7000-7500 & 8700-9200 in 2016/FY-17.
