Investors should brace for volatile times in year 2019 that could see the markets moving to both global and local developments amid positive macro developments such as softer oil prices, lower interest rates and better corporate numbers.
Year 2018 has been a choppy ride, with the benchmark Sensex giving modest returns of around 7 per cent compared with an over 28 per cent rise in 2017. Stocks took a hit from rising oil prices, a falling rupee and FPI outflows even as the US Federal Reserve raised rates and the trade war between the US and China escalated. Back home, the tiff between the government and the Reserve Bank of India culminating in the resignation of Urjit Patel as the RBI governor added to the worries. Moreover, the crisis at IL&FS, which led to non-banking finance companies facing a liquidity crunch, took a toll on the bourses.
While some of these challenges have abated, market mavens say the new year could bring its own set of difficulties to the investors as they have to contend with several key events. The most important domestic event will be the general elections. The major worry here is if there is a fractured mandate, the markets may take a knock.
“Investors will have to be prepared for volatility. We could witness choppiness in the global markets, impact of which could be felt here as well. Then we have our general elections. However, the economy is poised to be in a decent state with oil prices coming down. With commodity prices likely to remain soft, this should lead to better corporate performance,” Sudip Bandyopadhyay, group chairman of Inditrade Capital, told The Telegraph.
Bandyopadhyay feels 2019 could see a rebound in mid-caps and small-caps that witnessed sharp falls in 2018. He is bullish on sectors linked to India’s consumption sector and those with manufacturing bases in India such as pharmaceuticals and chemicals. If there are no major upheavals, the Nifty could be between 12000 and 13000 the same time next year, he added.
The first major event that investors will have to contend with is the third quarter numbers from India Inc. Attention will also be on whether the government comes out with any populist steps ahead of the general elections. There are reports that the Centre is considering a major relief package for farmers hit by poor crop prices.
“In terms of market performance, when we look back at 2018 and compare it with 2017, the latter was a walk in the park. Not only was India one of the best performing markets in 2017, it was also one of the best years in terms of volatility. The top to bottom correction in the Nifty during the entire year was less than 4.5 per cent. The comparable number for 2018 is 15 per cent, that too for large caps,” Essel Mutual Fund chief investment officer Viral Berawala said.
However, there are some who are optimistic. According to a note from ICICI Securities, as the markets move towards 2019, the catalysts for declines in 2018 are ebbing.
“While US economic growth is likely to normalise to trend levels of around two per cent, emerging markets, including India, are expected to remain on a healthy growth trajectory. The trade war rhetoric seems to be fading out as US and China have indicated a truce.Crude has cooled off. Amid this background, we expect domestic macro to be a key catalyst for market performance in 2019,” the brokerage said.
The next year also promises to have its own share of events, already there are four major market moving events by May. The three month window for US-China trade talks expires on March 1, followed by the Brexit deadline at the end of March. In early May, the six-month moratorium with Iran on oil exports will end, and post that the results of general elections in India will be announced’’, Essel Mutual Fund CIO Mr Viral Berawala said.
