If 2017 was the year of hope, 2018 will be the year of reality
Nilesh Shah, MD, Kotak AMC
Mar 16, 2018 | Source: Economic Times
The market valuations have now been trading in the higher zones for around a year now. In 2017, market prices ran away; as the GDP slowed down to absorb the structural changes happening during the year. But that is behind us.
Calendar year 2018 is likely to see good fundamentals despite some strong headwinds. India Inc Is doing a marvellous jobs despite burden of high real interest rates and overvalued currency. They are also doing well to absorb lesser availability of credit especially at lower end of the rating curve. Combination of high real rates, low credit availability and overvalued currency has subdued demand and kept capacity utilisation of India Inc at lower levels.
India Inc was cautiously optimistic for bulk of last three years as apart from rates, currency and credit they had to tackle disruptive reforms like demonetisation and GST. Now they are becoming optimistic shedding cautious stance. They are becoming optimistic as demand seems to be picking up and election-bound government is likely to keep spending tap open to benefit further strengthening of demand. This will help in improvement in capacity utilisation leading to better margin.
Sectors such as agriculture, rural and infrastructure are likely to see higher growth due to focus of the election bound government.
For investors 2018 is a year where they need to focus on asset allocation rather than market momentum. It will be a year of volatility rather than steady rise. It will be year of stock picking rather than sector picking. It will be a year of large-caps rather than micro and mini-caps. It will be a year of playing contra rather than chasing momentum.