Most experts are calling this to be a pre-budget rally and the euphoria is tied up to the Budget, and thankfully the December quarter earnings have not been bad in fact some of them were better than estimates.
Kshitij Anand
Moneycontrol News
After a strong 28 percent rally in the calendar year 2017, the momentum continued in the first week of 2018 as Nifty50 climbed mount 11,000 for the first time.
The index has been making record highs almost on a daily basis ahead of the big event, ‘Budget 2018’. The index completed its journey from 10,000 to 11,000 in just 6 months but there were plenty of stocks which more than doubled investors’ wealth at the same time.
The Nifty50 index rose from 10,000 for the first time in intraday trade on July 25, 2017 but it closed above the same level for the first time on July 26, 2017.
But, as many as 12 stocks from sectors like oil & gas, jewellery, textiles, chemicals, power and consumer durable rose 100-200 percent in the same period.
Stocks which more than doubled investors’ wealth in the CNX500 index include names like Rain Industries (up 232 percent), followed by Bombay Dyeing (up 201 percent), Radico Khaitan (up 200 percent), PC Jeweller (up 133 percent), Kolte Patil (up 133 percent), and Delta Corp (up 105 percent) etc. among others.
Most experts are calling this to be a pre-budget rally and the euphoria is tied up to the Budget, and thankfully the December quarter earnings have not been bad in fact some of them were better than estimates.
Manish Sonthalia, Head Equities- PMS, Motilal Oswal AMC in an interview with CNBC-TV18 said that there is always some excitement around the Budget. There is a lot of anticipation, expectation which gets buildup.
“As far as earnings season is concerned, companies have reported a good set of numbers apart from some paint companies which have not reported great numbers. Apart from the capital gains tax which if gets introduced could be a dampener for markets,” he said.
Apart from that Sonthalia said that there is lack of sellers in the markets on the back of earnings coming forth which gives a market lot of cushion.
The bulls charged on D-Street in the last 6 months but there were as many as 127 stocks out of Nifty 500 index which gave a negative return. Stocks which underperformed the index include names like Religare Enterprises (down 47 percent), followed by Bombay Rayon (down 43 percent), Kwality (down 31 percent), and HDIL (down 28 percent), and Strides Shasun (down 26 percent) etc.
Even though bulls are roaring on D-Street, analysts’ advise investors to remain cautious and invest only in quality stocks. One prime reason for that is the way small and midcap stocks are witnessing pressure in a rallying market suggest rotation trade.
Valuation is a concern but as long as Nifty is trading above key support levels, the rally is likely to continue. “We believe that the upward trend should continue in the markets. The current market euphoria can continue at least till the union budget led by the strong consumption pattern and better than expected performance from the IT and Banking companies especially the private sector banks,” Nitasha Shankar, Sr. Vice President and Head of Research at YES Securities (I) Ltd told Moneycontrol.
“From a broad perspective, valuations concerns do remain. However, a bottom up approach is warranted, as it makes sense for one to look at businesses with long runways of growth, strong balance sheets and good quality of earnings,” she said.
Shankar further added that stocks of companies having such traits will do well over longer periods as they would benefit from the power of compounding. Having said that, it would make sense for investors to exit stocks where the valuations are high and fundamentals are poor.