Mumbai : India remains a stock picker’s market in 2018, though the Nifty 50 may close the year at 10500 points, almost unchanged from last year, as earnings could be lower than consensus estimates, UBS Securities India has said.
UBS is ‘overweight’ on the private banking space, property, oil, gas, telecom, IT and auto parts, while it is ‘underweight’ on cement, industrials and infrastructure, reports Cogencis. For fiscal 2018-19, India’s growth is seen at 7.4% from 6.6% in 2017-18, while Nifty 50 companies could see earnings grow 13%, against 9% the previous year, lower than the consensus estimate of 22%, UBS said. Growth in GDP and corporate earnings in 2018-19 will come from a low base, due to the disruption to business following demonetisation and the GST roll out. UBS said the recent hardening of the yield on the 10-year government bond wasn’t supportive of stock markets in 2018, adding that most of the market performance in 2017 was led by a valuation re-rating rather than near-term earnings revisions. Pegging support and resistance for the Nifty at 8800 and 11900 points, respectively, UBS said the upside was that loan growth due to banks’ recapitalisation could push capital expenditure and economic growth.
Also, further spending by the government due to state elections in 2018 and general elections in 2019 could aid a recovery in corporate earnings growth. That, along with strong domestic and foreign investment flows, could push indices up to 11900 points. But, the downside scenario is that drivers of growth in select sections of the economy could wear off, and quicker fiscal consolidation and more anti-corruption measures would further drag growth down, and pull down the Nifty to 8800 points, UBS added.
