Elections 2014 Are The Ultimate Hope
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Market volatility is there to stay till the elections and one would get a number of opportunities to pick up a portfolio at lower levels says Ambareesh Baliga, Managing Partner, Global Wealth Management, Edelweiss Financial Services
Where do you see the Sensex going by Diwali next year?
There are a number of scenarios which could build up post the General Elections in 2014. The performance of the market will depend to a large extent on the outcome of the elections and the expectations from the new Government. Depending on two probable scenarios, the market could be either around 18000 or 25000
What are the major triggers that you are looking forward to in the next Samvat?
The major trigger would be the General Elections of 2014. The two probable scenarios would be a
- A Stable reform oriented govern ment with like minded allies and
- A fragile 3rd/4th front government supported by either of the national parties.
In case of the former, we could see a new bull run in the market. We could witness the worst in the economy by the Q3FY14 and the new government would be seen as aiding the recovery. Corporate and market sentiment would be revived with emphasis on asset creation. Employment generation and spending will be the corner stone of the recovery process.
In case of the second scenario, the initial revival will get stifled by the weak government unable to take bold economy boosting measures. Politics will take precedence over economy. Visibility will reduce which will shy away the foreign investors. Risk aversion will rise and market sentiment will take a beating. After the initial crack the markets will stabilize around 18000 levels on the Sensex as the economy will continue to grow albeit at a slower pace.
What is your take on the present macro-economic environment of the country, and how soon do you see it improving?
On the Macro front, the narrowing Trade Deficit, due to the recent uptick in exports has stabilized the Rupee which is expected to remain in a band of Rs 60-63 to a dollar. This is a definite positive. Yet, economic growth expectations seem to be dwindling. Industrial production is slipping and inflation is not expected to soften due to high food prices. Though the monsoon has been extremely favourable, the delayed withdrawal is a threat to the standing crops. The IMF has cut India’s growth forecast to 3.8 per cent. On the back of concerns about growth and the uncertainties due to impending elections, I believe the near term macro-economic outlook does not allow me to retain a positive bias especially when the index is close to the all time high. We could see green shoots in the last quarter of the current financial year on the back of global recovery, which would need policy support to continue.
Which are the sectors or stocks that you are betting upon for the next one year?
I would prefer companies in sectors like Agrochem, Agri-equipments (Tractors), Auto Ancillaries and select Pharma. Mahindra & Mahindra, Exide Industries, Motherson Sumi, Alembic Pharma, Indus-Ind Bank and United Phosphorus would be on my buy list.
What are your suggestions for retail investors keeping in mind the current market scenario?
I am of the opinion that we could see a 4-5 month pre-election rally, though the extent of the rally could be limited looking at the rich valuation in some of the performing sectors such as IT and Pharma. Yet, with regard to the long-term, investors should be cautious against taking risky bets and participate on a correction by investing in Large Cap fairly valued sectors such Metals, Oil & Gas, Infrastructure, Private Sector Banks and some good quality Midcaps with low gearing which could sail through the next few years despite a weak government. Market volatility is there to stay till the elections and one would get a number of opportunities to pick up a portfolio at lower levels.