With a coalition government, functioning cannot be as smooth as the market expects. If we get a coalition government in 2019, we can expect some correction.
The Nifty Midcaps and Smallcaps are currently looking good after a disappointing 2018. We feel that broader indices will do well if the market rallies in 2019, Vipin Khare, Director-Research, William O'Neil India, said in an interview with Moneycontrol’s Kshitij Anand.
Edited excerpt:
Q) After a stable 2018 what are your views about Indian market for 2019? Do you think election uncertainty will remain an overhang?
Except for November, FIIs have been net sellers in every month since April. Elections in May 2019 will be a key event to watch out for. However, the result may not have a drastic impact on stock markets as was observed in state election results.
India is likely to remain one of the fastest growing economy, but global factors like a slowdown in China, monetary tightening and growth/trade concerns in Europe, United States could mean weaker global growth in 2019.
However, the Indian domestic market should uphold the economy and that would be favourable for markets.
Q) Do you think Modi’s popularity is going down especially after state election results?
A) Weak performance in state elections is a concern for the ruling coalition but continuity at the Centre post 2019 elections cannot be ruled out.
General Assembly elections work differently in India and a 3-0 in a state election is not drastic enough to completely turn the mandate against the ruling party in 2019 general assembly elections.
Q) It looks like the government will dole out certain populist measures ahead of the polls to set the stage for the big day. Do you see this as a concern for D-Street?
A) The current government has been very responsible in maintaining its finances. We do not see any reason for investors to worry unless any specific signs of fiscal profligacy - which have been absent so far - become evident.
Q) The broader market remained under pressure in 2018. After the recent correction, do you think much of the froth is out and investors can again look at the mid and the smallcaps in the year 2019?
A) The Nifty Midcaps and Smallcaps are currently looking good after a disappointing 2018. We feel that broader indices will do well if the market rallies in 2019.
However, investors are advised to keep a close track of the earnings and buy stocks that demonstrate strong earnings acceleration. We would strongly advise investors to not play all the cards at once and follow a staggered approach to investing.
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