The macro risk is certainly predominant with rising crude oil price in recent period creating a negative sentiment for the domestic market.

expectation from the Union Budget 2018 centres around corporate tax rate cut coupled with increase in government spending while keeping the fiscal deficit under control. Further, we might witness subsidy with respect to home loan for the middle-income individual in its effort to push the housing for all 2022 theme," Dinesh Rohira, Founder & CEO, 5nance.com said in an interview to Moneycontrol’s Sunil Shankar Matkar

Edited Excerpts

Q) 2017 has been a great year for Indian equities as the market grew by around 25 percent. Do you see same kind of rally in 2018 also and what is your Nifty target for December 2018?

A. The confidence of the current government to execute a structural reform on broad level has leverage the investor with long-term optimism in the Indian equity market. The rally witnessed during the current year certainly paved buoyancy with similar expectation for next year. Taking a moderate stance on the backdrop of volatile year ahead for market in 2018, we expect Nifty index to trade at around 11,801-11,906 target level with upside of about 14 per cent by the end of December 2018.

Q) As the Gujarat election fever over, what are the next key events (or themes) to watch out for the year 2018? Will those events drive the market up or down?

A. There was certainly a euphoria in market after BJP winning from both the state assembly election in Gujarat and Himachal Pradesh. The win in election has positively flagged strong hold of current government with expectation of retaining the spot in 2019 general election.

Apart from the assembly elections to be held in 7-8 states in 2018, the major event to watch in 2018 will be the Union Budget which is due on 1st of February. It will be closely watch event with expectation of corporate tax rate cut coupled with major spending outline by government among others which will be the market in volatile regime. However, it will be too early to comment on market momentum but it will likely be positive event for the market if the expectation turns true. On the flip side, the possibility of rate hike by RBI in any of 2018 bi-monthly meeting will stretch hostile situation for the equity market if the mandate inflation rate gets breached at upper side.

Q) The domestic liquidity supported markets in the year 2017. Will that liquidity support continue in 2018 as well or do you see some tapering of flows?

A. Given the India’s long-term macro story at positive grid, the inflow from both the category of investors pumped funds into Indian equity market in current fiscal year. The rich liquidity in global market along with domestic liquidity post-demonetisation upsurge the various asset class to trade ahead of its fundamental particularly in equity asset class.

The domestic market is expected to support the equity market with positive liquidity outlook on the backdrop of slowing yield curve movement and reducing interest rate regime in fixed income asset class. Further the government’s stimulus package for the weaker sector is expected to get phase out in next year with its effort to boost the economy and thus indicating a positive outlook for the corporates. However, the Indian market might witness a headwind in foreign inflow with major central banks across the globe beginning with normalcy monetary policy. Any rate hike by US fed by 50-100 bps in next year might drive away inflow from emerging market like India and keeping the market in pressure.

Q) Everyone is saying corporate earnings were far better-than-expected in September quarter. Do you see December quarter earnings laying foundation stone of earnings recovery?

A. The headwinds witnessed during the demonetisation coupled with rollout of GST propelled the equity market with hawkish earnings growth. It saw a subdued earnings growth during the first quarter of FY18 with both the structural reforms taking its form. However, the earnings data in Q2FY18 revealed an uptick in business with majority of the corporate earnings data beating the estimates. Given the interim data indicating a positive outlook with increasing consumer spending and major project take-off, it is expected to show similar trend going forward in Q3FY18.

Q) After Gujarat elections there are as many as 8 state assembly elections lined up before general elections in the year 2019. Do you see a change in tactics of the Modi government or a policy shift in policy framework - from reformist to populist? What are your key expectations from the last full-fledged Budget, especially after Gujarat elections results?

A. The Modi government has shown a stability in power after winning Gujarat election and similar action could be seen next 2018 assembly election. However, given the circumstantial of the states in upcoming assembly election, the policy might see certain mild populist framework underlying the low-income individual in agenda.

Further, the expectation from the Union Budget 2018 centres around corporate tax rate cut coupled with increase in government spending while keeping the fiscal deficit under control. Further we might witness subsidy with respect to home loan for the middle-income individual in its effort to push the housing for all 2022 theme. The government is likely to outline a roadmap on NPA resolution and frame a better outlook going forward with PSU banks.

Q) Top five stocks which you think could give multibagger return in the next 2-3 years?

A. Dilip Buildcon

The improving sector outlook on the back drop of Bharatmala program and the company’s capability to execute the diversified projects enables Dilip Buildcon to positions itself on frontend. The company has close to Rs. 14,000 crore order book as of second quarter which is higher comparing to other peers.

The company’s ability to execute the project faster has enable to boost the operating margins with lower financial leverages. Given the strong business model coupled with traction in order inflow and declining leverage, it is expected to give higher growth.

Manpasand Beverages

The expectation of revival in consumer spending especially from the rural segment on the backdrop of good monsoon during last two fiscal years is expected to boost the growth in FMCG sector. Manpasand Beverage is expected to capitalize on growing demand for mango beverages which is the core business of the company.

The company is expected to benefit from recent hike in FII investment coupled with its expending distribution network anticipated to create better capacity utilization. Further, despite business in sector, it registered an 18.2% y.o.y. increase in standalone revenue in Q2FY18 while the PAT increased by 64.8% y.o.y during the same quarter.

Venkys (India)

The structural reforms like GST is expected to benefit organized company in poultry market like Venkys on long-term basis. The has shown consistent profit growth of 28.81 per cent in last 5 years despite remaining under pressure during the second quarter of the FY18. The lower profit margin attributed to increase in cost of feed coupled with finance cost which was used for business expansion project.

It is expected to create niche for the company upon the commission of the projects. We anticipate to outperform the broader market with scrip trading upward at 571.76 per cent on YTD basis.

Sunteck Realty

The focus of current government on affordable housing scheme is empowering Sunteck Realty to capitalize on residential development and it is expected to create a long term growth opportunity for the business.

As company focuses to launch mid-income value home projects under the affordable housing segment over the next few quarters, its speciality in residential development is expected to offer niche branding for the business. With increased habitation in metropolitan city (Mumbai), the sales volume is expected witness upsurge.

Rain Industries

Rain Industries is the second largest carbon product supplier to the market in aluminium industry coupled with its diversified business spread across cement and chemical segment. With uptick in infra sector along with chemical segment, Rain Industries is well positioned to cater the demand from all three segment.

Further its arm commenced the operation of waste heat recovery based power plant which is expected to reduces the cost of power generation. The growth story from the Indian economy is anticipated to create huge opportunity for the Rain Industries.

Q) Apart from rising crude oil prices, what are the other macro risks for Indian markets in 2018?

The macro risk is certainly predominant with rising crude oil price in recent period creating a negative sentiment for the domestic market. However, apart from the crude price, India is poised for risk from global central banks such as US fed rate hike & normalcy of monetary policy in European region, thus impacting the dollar inflow coupled with pressure on Indian rupee.

Further the rising inflation rate and worrisome fiscal deficit is likely to keep Indian market at volatile regime. The market also poses a risk over geopolitical concerns especially from North Korea turning the Asian market in hostile situation.

 26 Dec 2017, 12:03 PM