Markets in the near term would be driven by the Presidential election rhetoric (affecting USD, and hence inflows into EMs), OPEC discussions, a possible last interest cut by the RBI, and the Q2 results. While being volatile, from an end-of-year perspective, by when the Fed rate hike position would also be clear, it is likely to be flat from here.
1 year perspective, expect > 15% Index upside based on: Positives: a major fall in effective interest rates positively affecting corporate profitability, 20% Sensex EPS growth in FY 18, Consumption thrust by Govt, and global liquidity. Negatives: Populist policies starting before UP elections (~ May 2017), anemic global growth discouraging domestic capex.
Q2 sectoral outlook: Good monsoon + DBT in Rural + Pay commission/ OROP awards in Urban India imply a better demand outlook for Auto and FMCG (however, sugar prices to rise further). Banking to see major treasury gains with PSUs’ credit costs moderating; but credit demand to remain weak. Recovering refining margins would help all OMCs.Domestic gas demand to increase as spot LNG prices weak (higher supplies). In Pharma, domestic acute businesses to do well. Engg/ EPC order flow recovery is being pushed back, except in roads. Weak outlook IT, Telecom, Realty.
India
NRI
