FIIs upbeat on India, say Nifty to touch 9000 in 2016

FIIs upbeat on India, say Nifty to touch 9000 in 2016

Ridham Desai, MD, Morgan Stanley India, says India continues to be the best house in a bad neighbourhood and that there is tremendous appetite to buy India.

Speaking at the India’s biggest 'Investor Summit’ organised by CNBC-TV18, most of the FII panel believed that the there is a case to be made for emerging markets this year

Bharat Iyer, MD, JP Morgan India, believes if earnings were to return for the EMs then one could make 10-12 percent returns from them. However, he says one should not compare the EM returns with that of developed market (DM). Agreeing with the view, Gautam Chhaochharia, Head-India Research, UBS, says while EMs will deliver a positive returns but would be lower than DMs. “Base is favourable for EMs but the growth outlook is still weak,” he adds.

However, Rakesh Arora, Head-Research, Macquarie Capital Securities, says there is a big difference within EM countries and according to him countries that are consumers of commodities will significantly outperform countries that produce commodities. “So, our pecking order amongst EMs is China, India and then the others,” says Arora.

Talking on the outperformance of India, Arora believes Indian government is on the right track and that there are many things changing -- like the way of business is done is changing, Chrony capitalism is out and all these positive initiatives will take shape in 2016 and as confidence returns to India growth story, market will get rerated. “FY17 we see rerating of market, which will drive the outperformance,” he adds.

Ridham Desai, MD, Morgan Stanley India, says the house was and is most bullish on India. It is their number one emerging market. However, he thinks earnings in India will pick up over the next 12 months and could be a material driver but it is always tricky to forecast earnings, he adds.

From his interactions with foreign investors, Desai says India continues to be the best house in bad neighbourhood with a 1 and 3 to 5 year view and that there is tremendous appetite to buy India. So, whenever the market corrects, investors will come and buy even though rest of the EM world may be challenging,

So, 2016 could see some recovery in earnings along with stable multiples, says Desai.

Talking on the India story, Iyer clearly believes risks for India are external than internal because internally, the policy environment is very robust. The global macros have been positive for India; there was very modest growth all around which resulted in lower crude prices and benign liquidity. However, if either of these were to turn then it could pose a risk to our market, he adds.

When asked what they would buy or bet on in terms of sectors and stocks, Chhaochharia. Says he would bet on financials and pharma. The rational behind liking financials is that if growth picks up then it will surely do well but even if growth is subdued and thesis of lower interest rates will play and financials will be big beneficiaries from lower rates driving lower NPLs.

Arora says, the driver for the market this year was the domestic investors and domestic mutual funds who invested in midcaps and they rallied. The year 2016 may not be different, he says, adding that one could see two dominant themes play out. One is government led infrastructure push, which will pick pace in terms of execution and second, is urban consumption. Therefore, the house would look to invest in these themes

Meanwhile, Iyer is positive on IT because the demand environment in US is still stable; adding that rate hikes in US will happen when economy is in good shape and when that happens, dollar will strengthen and rupee will weaken and benefit the IT companies.

Apart from IT, Iyer likes the high quality financials, and highways, railways, defence on the back of government’s focus on investment in these spaces. He also likes the housing finance companies.

On Fed hike expectation, Arora says that there is 60 percent chance of rate hike in December and around 1.25 percent by end of 2016.

Desai too says that the house view has been that Fed will hike in December and will continue with steady rate cycle.

Speaking on Nifty returns for 2016, Arora says he has a 9200 target on Nifty, while Desai says he has an Sensex target of 30,000, which could be 15 percent appreciation for Nifty. Chhaochharia sees around 10-12 percent upside for Nifty and Iyer says Nifty would touch 9000 sometime in 2016.

Happy Investing

Source:Moneycontrol.com