Sanjeev Bhasin, executive vice president at domestic brokerage IIFL said Indian markets are on a cusp of a new bull rally and Nifty may retest 8,000 levels in April and 9000 by December 2016.
“In April we think Nifty may be at 7,800-8,000; by December 31, 2016 Nifty will be between 8,500-9000. Nifty could be closer to 11,000 by December 31, 2017,” Mr Bhasin said in an interview to NDTV Profit. (Watch)
The Nifty has rallied over 10 per cent from February 29, when the Union Budget for FY17 was announced. Foreign institutional investors who had sold stocks worth nearly Rs 20,000 crore in the first two months of 2016 have resumed buying again and have pumped in over Rs 15,000 crore in this month so far.
“India is in a sweet spot because oil at $40(per barrel) is much better positioned than oil at $30. We are seeing green shoots emerging at the manufacturing side and the government’s policy on coal, power, capital goods. Interest rates are on a lower regime,” said Mr Bhasin.
Mr Bhasin further added that there is high probability of a 50 basis points (0.5%) repo rate cut in the April from Reserve Bank of India, which will be a main driver for corporate earnings in FY17.
“The bond yield at 7.5 per cent indicates that there is 40 per cent chance of a 50 basis point rate cut in April…This will strengthen the private capex, which has been in a lag. Earnings may pick up owing to lower interest rates and in the second half of this year we may see double-digit earnings growth for corporates,” Mr Bhasin added.
A possible revival in private capex augurs well for capital goods companies like L&T, BEL, Siemens and Bhel, said Mr Bhasin.
He also made a case for buying state-owned banks like SBI, Bank of Baroda and Punjab National Bank on corrections as falling bond yield and government’s PSU bank recapitalisation plan will benefit them.
However, Mr Bhasin said that market may witness some profit-booking in the near term going into the expiry of March series derivative contracts.