Indian Stocks in 2019
They say making predictions of the stock market is an art and not a science. Whichever way one takes - an analytical approach or an intuitive approach, markets are extremely difficult to predict.
All major markets in 2018 - barring that of India's closed negative in 2018.
China was down 25.5% and Japan was down 14.4% on a year on year (YonY) basis in 2018.
India's stock market ended the year 2018 its approx 4% gains.
Amongst the Indian equities - the valuation of indices - Nifty (NSE -50 ) and Sensex (BSE 30) is still above historical averages (is expensive). However if you break up all the listed stocks you will find that small and mid cap stocks have slid 28% and 18% from their respective peaks in 2018.
This is the Indian equity, but how does the global scene look like.
US China trade wars have increased the risk in Global markets, the developed markets (DMs) led by US are growing and are at near full employment state. This means that further employment in the US will result in increase in wages - which will increase the risk of inflation. In order to address inflation the Central Bank in US will increase the interest rates.
Remember as the interest rates increase - consumers tend to increase savings and reduce consumption - thus bringing demand - of good and services they consume - down. This then checks the rise in prices and brings the inflation down. Easier said that done as it takes time - sometimes years - for this phenomenon to play and policy decisions by banks also are impacted by many other factors such as global factors etc.
Goldman Sachs Asset Manages (GSAM) though predicts a fovorable equity view for Emerging markets based vis a vis Developed Markets.
Goldman Sachs outlook in 2019
Andrew Holland the chief executive officer of Avendus Capital Alternate Strategies -India's largest Hedge Fund - is positive on India's equity market despite multiple stock routs in the US.
India is heading to general elections in 2019. The real election risk is a very unstable, semi functional government and/or one with no market priorities. That could hurt the markets. The government continuing or a reasonable stable government in place should see the economic trajectory reverting to its longer cycles. This should translate into a NIFTY target of about 11800 by December 2019.
Also Developed markets will have a sentimental impact on emerging markets including India.
Therefore it may not be a good idea to rush into the markets as there are a lot of moving parts. It's going to be a volatile first six months in 2019 and therefore one has to tread carefully.
Beaten down stocks in Banking and Auto are tending to gain as sense prevails and consumption - especially non discretionary - although very expensive has been a secular growth story in India and will continue to do so.
Its going to be an interesting year and while caution is called for, its always a good idea to invest when markets are down or correct. Hence "invest in fear" is what will separate the winners this year.
(Disclaimer : Not to solicit any business. Investing in equity markets is a with risk investing and hence it is our view that investments in equity markets must be done for a minimum period of three years.)
