Expert Zone

Straight from the Specialists

Is the current euphoria in equity markets justified?

(Any opinions expressed here are those of the author and not of Thomson Reuters)

The third-quarter results season corroborates my view that 2014 will be a year of fragile recovery for the Indian economy. Fragile, I reiterate.

The market, however, has run up to an all-time high, with the Nifty breaching the psychological barrier of 6,500. Is the euphoria justified?

At an aggregate level, the results indicate a typical bottoming out – though revenue growth is muted, the margins have improved. This shows companies are becoming leaner and meaner.

An analysis of 997 public companies (excluding financial and oil companies) shows a revenue growth of 11.6 percent and an EBITDA margin expansion of nearly 121 basis points or bps (100 bps make a percentage point) year on year.

How election years affect the stock market

(Any opinions expressed here are those of the author and not of Thomson Reuters)

The ongoing stock market rally has been primarily supported by foreign investors. The rupee also rose to a near three-month high against the dollar on Friday.

It is rather unusual for the Indian market to jump in pre-election months, particularly after 1996 when coalitions became the new political strategy to make up for shortfalls in parliamentary majority. In most election years, the market had actually fallen just before the elections – in 2004, by more than 10 percent.

India Markets Weekahead: It’s time again for an election year ‘rally of hope’

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

Despite a volatile Friday, it was a good week for the markets and saw the Nifty close about 90 points higher at 6,261, with sentiment supported by better-than-expected quarterly results and benign inflation data.

The few earnings that disappointed investors seemed to affect specific stocks without having a bearing on either the sector or the markets.

India Markets Weekahead: Driven by hope in an election-led rally

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The New Year was ushered in with a steep and sudden correction in the broader indexes, with the Nifty closing 1.63 percent lower at 6,211. However, the mid-cap and small-cap indexes outperformed.

Though the holiday mood was evident, it was a politically charged week. The newly installed Aam Aadmi Party (AAP) government in Delhi won a confidence motion with the support of the Congress. They subsequently announced power subsidies after granting water sops last week. Prime Minister Manmohan Singh addressed a rare press conference, the third in 10 years, announcing his intent of handing over the baton to a new prime minister.

Will 2014 be any better for investors?

(Any opinions expressed here are those of the author and not of Thomson Reuters)

High inflation, low GDP growth and a sharp depreciation in the rupee led to subdued returns of 6.8 percent for the Nifty in 2013.

The core sectors — steel, cement, industrials, energy, infrastructure and capital goods — continued their poor performance and hence valuations shrunk, while consumer staples, IT, pharma and private sector financials bucked the trend. But the polarisation towards a few sectors underscores growing risk aversion.

Unclear messages from the electoral tea leaves

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(Any opinions expressed here are those of the author and not of Thomson Reuters)

The past 12 months have been characterized by the narrowest market in two decades although sectoral performance varied significantly. While the markets are likely to be range-bound, valuations are expected to rise in 2014, especially in the first half.

Based on a one-year forward PE range of between 12.5 and 15 times and our top-down FY15 earnings growth forecast for the Nifty of between 10 percent and 15 percent, we expect the index to trade between 5,500 and 6,900 in 2014, with a target of 6,900 — an implied increase of around 10 percent relative to current levels.

India Market Weekahead – Volatility to continue in the run-up to general elections

(Any opinions expressed here are those of the author and not of Thomson Reuters)

Investors pressed the panic button on Friday with the Nifty diving 4 percent, its biggest single-day fall in two years, to end at 5508.

Measures taken by the Reserve Bank of India (RBI) on the eve of the Independence Day holiday to prop up the rupee were among the triggers for the fall. The rupee didn’t do all that well either, falling to an all-time low of 62.03 to the dollar early on Friday.

India Markets Weekahead – Company results key for market direction

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(Any opinions expressed here are those of the author, and not necessarily of Thomson Reuters)

Infosys stumped Indian markets again but for a change — positively. Recent management comments had built expectations of underperformance which led to cautious to negative views on the stock. Institutional investors were light on Infosys whereas the more adventurous speculators were short. And we were all caught on the wrong foot when the company declared a revenue growth as well as a net profit much better than consensus expectations.

India Markets Weekahead – Set for new high with no roadblock in sight

A resolution for the U.S. “fiscal cliff” helped the markets cross the psychological Nifty benchmark of 6,000 to close the week up 1.82 percent at 6,016.

Though I expected a spirited rally, what we witnessed last week is a strong consolidation around 6,000 which could form a solid bottom for the next leg of the rally. This is also facilitating the entry of domestic retail investors which is visible in the mid-cap and small-cap volume and performance. The BSE small-cap index moved up 3.71 percent whereas the BSE mid-cap index gained 3.13 percent.

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