We recommend that 50-60 percent of capital should be parked in large caps, 20-40 percent in mid & small caps and 10-20 percent in thematic stocks, Jagannadham Thunuguntla, Sr. VP and Head of Research (Wealth), Centrum Broking Limited, said in an interview to Moneycontrol’s Kshitij Anand.
Q) The year FY18 pared most of the gains thanks to steep correction seen in the month of February and March. How is FY19 likely to pan out for investors – will it be a year which belongs to the bulls or bears will keep gains in check?
A) In the first 10 months of the financial year (April-January), markets have given strong returns. There have been positive developments like Moody’s upgrade of India’s sovereign rating, the rise in India’s ease of doing business ranking and the implementation of the Insolvency and Bankruptcy Code.
However, starting February 1 with the announcement of the Union Budget, the imposition of Long Term Capital Gains (LTCG) Tax has led to the sentiment of the capital markets taking a U-turn. Markets have seen a heavy correction.
The imposing of heavy import tax as part of the US trade war also fuelled the market fall. In FY19, market performance will largely depend on Indian political developments as elections approach.
From an international standpoint, it will also need to be seen how the markets react to the panning out of trade wars.
Q) Any top five stocks which you think are ideal wealth-creating ideas which investors can look at buying in the coming FY for a period of 2-3 years?
A) We are bullish on largecaps names like Larsen & Toubro, Maruti Suzuki, and IndusInd Bank. We also remain bullish on midcap stocks like RBL Bank, Visakha Industries, and Natco Pharma.
Q) Do you see Modi 2.0 as we inch closer to national elections in the year 2019?
A) 2018-19 is a busy calendar year with state assembly elections lined up in states like Karnataka, Madhya Pradesh etc.
Lok Sabha elections are also fast approaching in 2019. It also needs to be seen whether there will be any preponement of LS elections.
Presently, there is some degree of political uncertainty as some of the NDA allies have grown restless. Results of by-polls will also be a decisive factor in keeping the markets guessing on the 2019 elections outcome.
Q) Mid and Smallcaps which hogged the limelight in FY18, do you think the trend will continue in the next financial year? If yes, why?
A) Performance of stocks in FY19 will depend on the quality of companies, quality of management, balance sheet performances and profitability. FY19 will not be as easy as FY18 when markets were at an all-time high.
In 2018, investors should preferably seek professional advice for investments. The year 2018 will differentiate men from boys.
Q) There is a big hue and cry about crude. Do you think that the black gold could trade above $75-80/bbl?
A) Crude oil is an important metric for Indian markets because India imports almost 80 percent of its crude requirements. The crude oil price can impact the Indian import bill and hence the Indian current account deficit. As long as crude oil price remains below USD 75, Indian macro ratios look good.
Q) What should be the portfolio composition of investors in the coming financial year assuming he is in the age bracket of 35-40 years?
A) We recommend that 50-60 percent of capital should be parked in large caps, 20-40 percent in mid & small caps and 10-20% in thematic stocks.
Q) Do you think earnings is likely to bounce back in double digits in FY19?
A) From an earnings standpoint, FY19 is a crucial year because, in FY18, non-BFSI stocks have shown green shoots. However, BFSI stocks remain under pressure due to NPAs. Hence, FY19 is crucial to see how banking NPA performance will play out.
Q) How should investors play PSU banks in FY19 given that we are seeing new frauds from different banks almost on a daily basis?
A) The Indian banking system is going through a clean-up process which is leading to the reporting of a huge number of fraud cases. However, even though it is a painful situation in the short term, it will eventually help in improving the overall health of the Indian banking system.
Q) How will fears of trade wars likely to play out for Indian markets in FY19? Which sectors are likely to see the worst of it?
A) The levying of heavy import duties on account of the US trade war led to the fall of domestic markets. It remains to be seen how the trade war will eventually play out and what would be its possible impact on Indian markets.moneycontrol