Sensex to rise 10-15 pct in 2015: Vinod Nair of Geojit BNP Paribas

March 18, 2015

India’s BSE Sensex has gained nearly 4 percent so far in 2015 after the benchmark surged to record highs following the electoral triumph of Prime Minister Narendra Modi last summer. Vinod Nair, head of research at Geojit BNP Paribas, says markets are now consolidating and likely to take cues from corporate earnings and global factors such as a rate hike by the U.S. Federal Reserve.

On March 16, Nair joined Trading India Forum, a live webchat hosted by Thomson Reuters where members from the financial industry interact. He shared his views on the stock market, sectors to watch out for, and why he thinks the U.S. central bank will not hike rates for now.

Below is a highlight of Nair’s quotes. Questions are asked by participants in the chatroom.

Q. What is your view of the Sensex in 2015?

A: We believe that currently we are in a phase of consolidation. This phase will depend on (1) when the U.S. rate hike will start (2) what will be accomplished in the current budget session and (3) when will earnings growth start. Depending on the same, we can expect 10-15 percent growth in the Sensex this year.

Q. How do you see retail investors reacting to the Nifty being close to an all-time high?

A: Retail volumes are yet to start but we are seeing good growth in smart money, largely going towards mutual funds. We can expect better demand in the second half of the year.

Q. What sectors will you look at over the next one year?

A: We can expect a shift towards infra, capital goods, consumer electricals and PSU banks over the next 1-3 years. We can avoid FMCG and auto in the medium term.

Q. Avoid FMCG and auto for valuations?

A: Correct. Avoid FMCG for valuation, and auto for poor numbers from both two and four wheelers and auto ancillaries.

Q. How do you see the IPO market going forward?

A: The IPO market will increase as the domestic economy improves in the latter half of the year. Today they are still below expectations.

Q. Any thoughts on Mark Faber’s view of correction in Indian stocks?

A: We don’t believe a high correction of 20 percent, but 6-9 percent from the high. There is an extreme possibility of having a big correction if unknown events happen – Grexit, U.S. rate hike and bad budget session.

Q. What is your view on the IT sector?

A: We are positive on IT largely because of two reasons: They continue to outperform in operational improvement (better business demand than expected) and secondly, valuation is fair.

Q. What do you think about the impending U.S. Fed rate hike? Will it happen this year? If so, by when?

A: This is very important since it will impact the cost of liquidity in the world and hence EMs (emerging markets) for inflows. Having said that, we do not expect any immediate increase in rate since inflation is much below the target at 2 percent. May be in the last half of the year, the rate can increase if (1) Fed lowers the target inflation given poor world data and (2) continuous better economy data from the U.S. as seen from jobs and home data.

(Trading India chat hosted by Savio Shetty. Transcript edited by David Lalmalsawma, Sankalp Phartiyal. Follow Trading India on Twitter @TradingIndia, David @davidlms25, Sankalp @sankalp_sp. This article is website-exclusive and cannot be reproduced without permission)

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