Hyderabad: Kotak Securities cut its FY20 GDP growth estimates to 4.7 per cent. There is a disconnect between equity markets and economy and this could stay for some time as high-frequency indicators are not showing any signs of improvement whereas markets could remain at elevated levels on hopes of certain sops likely to come in the forthcoming Union Budget, according to Rusmik Oza, Senior Vice President and Head of Fundamental Research, Kotak Securities.
Speaking to the media on market trends here on Tuesday, Oza said the Year gone-by has seen Nifty giving double-digit returns, mainly led by only a handful of its constituents. The broader market is still under pressure with both midcap and smallcap indexes showing negative returns in this calendar year to date, he said.
According to him, the market mood is more positive than what is reflected in the real economy. This is mainly because of improvement in earnings led by a reduction in corporate tax rate and strong FPI and SIP flows.
The RBI has cut rates by 135 bps in 2019 but banks have reduced the benchmark rates by 55 bps only. Bank rates are more relevant to the economy as bulk of India’s borrowing and lending is through the banking system. This year to date, the foreign portfolio investors and domestic institutions have invested about $ 20 bn (more than Rs 1.4 lakh crore) in Indian equities, which helped Nifty-50 deliver double-digit returns. Average monthly SIP flows into mutual funds have inched up to Rs 8230 cr providing cushion to the market, he said.
Privatisation could be a big theme in 2020. Strategic sale of BPCL, Concor and Shipping Corporation can provide the Government about Rs 80,000 crore. This year’s monsoon rainfall has been the highest in the last 25 years paving way for a better rabi output and higher income in the hands of the rural population, said Oza.
Nifty-50 can touch 13,400 by December next while BSE Sensex could touch 45,500. “For the mid and small caps to outperform the large caps, we need a broad recovery in the economy with improved credit offtake, better IIP and GDP growth,” he said adding incentives to taxpayers and investors in the Budget next year could revive interest in the mid and small-cap space.
On impact of Karvy episode, Oza think there will be a consoildation in the industry and retail investors will move to bigger brokerages and will now insist on client ids being linked with their demat accounts to avoid pledging of shares by brokerages.