By Mr.Gagan Singla CMO of AngelBroking
The first half of 2018 has seen a lot of volatility in the market for a number of reasons. The traction of the corporate earnings, movement in the prices of the rupee and crude oil could be some of the major factors which have the capacity to influence the market conditions for the rest of the year. As the second half of the year has been welcomed with a good monsoon throughout the country, there is a feeling of optimism among the traders about closing the year on a high. However, there are many questions in the minds of the traders and analysts which needs to be answered for them to feel at ease. Let us discuss some key elements which could give us an indication of what the rest of 2018 could have in store for us.
Influencers like Rupee Value, Crude Oil Prices, and Corporate Earning Traction
Russia and Saudi Arabia’s measures to deal with a possible shortage in oil supply and a rise in US oil production could result in a favourable change in the price of crude oil. This will also have a significant impact on the depreciating value of the rupee.
Add to that the traction of the corporate earnings and one can easily expect the current market valuation multiples to sustain. With these factors coming into play and India witnessing a good monsoon, the remainder of the year could prove to be profitable at the share market.
Analysis of the March Quarter Earnings
The March quarter has been a sort of a mixed bag, as different sectors have encountered different results. However, when analysed from an overall point of view, the numbers look to be as per expectations, at least from the revenue perspective. One of the major reasons for profits being recorded was the provisioning by PSU banks. In terms of margins, the auto sector was affected by the rise in the price of raw materials, due to the firm costs of metal at a global level. On the other hand, FMCG enterprises were able to improve their margins.
In the immediate future, the expected consensus earnings growth is a touch over 20% for FY19, which is in sharp contrast to the growth of about 10% in FY18. This being said while one should expect further traction being gained on earnings growth, it will though not be wise to rule out some degree of downgrade from FY19 earnings. However, this should not be a significant deciding factor.
Large-caps, Mid-caps or Small-caps?
SEBIs reallocation dictum for the mutual funds has triggered corrections of a certain level in the small-cap and mid-cap realms. Due to this, many good companies have been able to make its way back to the valuation comfort zone. Moreover, the possibility of these caps generating greater returns is also higher as over the last ten years, or so the small-caps and mid-caps indices have almost always outperformed the Nifty. However, the investors should tread carefully on these roads as this space involves more volatility and risk.
Mr. Gagan Singla is the CMO of AngelBroking, a leading stock broking and wealth management firm in India. He holds a B.Tech degree (Computer Science) from IIT Delhi and MBA from IIM, Lucknow. All in all, he has over 15 years of experience in analytics, consulting and marketing. He has been instrumental in delivering analytics-driven transformations in multiple industry sectors including banks, insurance, eCommerce, AMCs and public sector across numerous geographies including the US, UK, Europe, Malaysia, India & Canada. In the last couple of years, he has taken up leadership roles in digital marketing to drive business growth in the new digital age.
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