Mumbai: The Nifty has risen 4.72% so far in 2018, marking its best performance in the last 13 years in the one-month period ahead of budget. Market investors are hopeful that the government will manage a balance between fiscal discipline and growth reforms in the budget, while rural economy boosters and infrastructure push will be the key focus.
According to India Ratings, it is unlikely to be a populist budget with allocations to be in the form of investments rather than freebies.
Morgan Stanley said that policy makers will likely take a pause on fiscal consolidation, keeping the fiscal deficit target in at around 3.2-3.4% of the gross domestic product (GDP) for FY2018 and FY2019. “Beyond the headline deficit numbers, investors would also be watching for signs of redistributive spending, particularly for rural households. In our view, it would be important to ensure that the efficacy of these social spending schemes is maintained or improved further, so as to limit the attendant impact on macro stability,” it said in a report on 29 January.
Riding on the optimism, the markets touched record highs multiple times this month. Among the 50 stocks in Nifty, 28 gave positive returns in this year so far. Another factor which is lifting sentiments is the recovery in December quarter corporate earnings.
Out of the Nifty stocks, 10 stocks rose over 10% in this one-month period. Surprisingly, most of these stocks are from the IT sector that were major laggards in the blockbuster rally of 2017. The major gainers among Nifty stocks are Tech Mahindra (up 21.55%), Indiabulls Housing Finance Ltd (up 16.24%), Tata Consultancy Services Ltd (up 15.22%), Housing Development Finance Corp. Ltd (up 14.38%), Coal India Ltd (up 13.92%), Larsen & Toubro Ltd (up 12.58%), Yes Bank Ltd (up 12.45%), ICICI Bank Ltd (up 12.40%), HCL Technologies Ltd (up 10.79%) and Infosys Ltd (up 10.38%).
Expectations that improving global economy could spur tech spending, which may lead to a re-rating of IT stocks, are driving Indian IT stocks this year.
Meanwhile, a stock like Indiabulls Housing Finance Ltd, which rose 84.02% last year, continued its bull run in 2018 on strong business momentum. The company clocked strong operating performance in Q3FY18, with core net profit jumping over 23% on an annual basis.
Housing Development Finance Corp. Ltd saw over three-fold jump in its standalone net profit at Rs5,670.21 crore for the December quarter. The mortgage lender is expected to be able to withstand increasing competitive intensity and deliver healthy return ratios.
The rise in Coal India share price this year after falling 12.35% in 2017 is due to significant price hike which is likely to offset wage increase. Recently, the government-run company has rationalised prices across grades resulting in an average price hike of 9%.
Post a weak first half of FY18, when orders declined 9% year-on-year (y-o-y), Larsen and Toubro reported a 38% y-o-y increase in fresh orders for the fiscal third quarter and reiterated its revenue growth guidance of 12% for the current fiscal.
Rally in Yes Bank is led by firm Q3 FY18 results. Yes Bank reported an all-round improvement on the asset quality front led by 75.1% (quarter-on-quarter) decline in fresh slippages and decline in gross non-performing asset (NPA) ratio in the December quarter.
Among major losers among Nifty stocks so far this year were Bharti Airtel Ltd (down 16.95%), Eicher Motors Ltd (down 11.26%), Aurobindo Pharma Ltd (down 8.49%), Dr Reddy’s Laboratories Ltd (down 7.82%) and Tata Motors fell (down 7.4%).livemint