VK Sharma, Head – PCG & Capital Market Strategy at HDFC Securities

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expects the market to hit a fresh high before the 2019 elections. In an email interview with Pranati Deva of CNBC-TV18.com, he said that in the current scenario he will add on more mid-caps at this juncture as their valuations are still cheap. He also sees the BJP getting more seats than in 2014.

The Election Commission, on Sunday, announced that the Lok Sabha elections will be conducted in seven phases starting from April 11-May 19 and the counting of votes will take place on May 23.

Do you see a case for a fresh high to be taken before the big 2019 elections?

Absolutely. We have said this in early January that the markets will make a new high before the elections. The reason was simple, there is no way the nation is going to select a motley collection of parties, whose common agenda is not what they can do for the country but to keep the BJP out.

The budgetary provisions for the common man and farmers have lessened the angst and consolidated the traditional vote bank for the ruling party. The recent skirmish with Pakistan has also acted as a bonding agent for the public to rally behind the armed forces.

Those who are not sure, who will come to power will prefer to wait. But to the discerning eye, there is no uncertainty what so ever.

Are we going to see a prolonged move on the upside or is this a flash in the pan move right now?

This is no flash in the pan. Currently, the Nifty is just 6 percent below its August high of 11,760. We should make a new high before the elections.

The rupee is also strong and the global central banks are changing track. The US Federal Reserve has now turned dovish. RBI has also turned accommodative. Private forecasters foresee a normal monsoon. Hence, India’s outperformance is likely to continue even in a slowing global economy.

The FIIs have also turned buyers of late. So this current bullishness will take the markets to newer highs.

How would you suggest rebalancing the portfolio? Which sectors would you like to add and drop?

We would like to pay more attention to asset management companies, insurance, FMCG, cement, media, and choose mid-cap stocks with good visibility.

Anything that you would buy afresh in the current market?

We will top up on mid-caps at this juncture as their valuations are still cheap considering they have gone through a long winter.

Volatility has seen a pick in the recent days. Do you think that phase is likely to get prolonged?

The volatility in the Indian markets has been falling over the years. And whatever volatility one sees today, will not remain elevated. It is likely to come down. There are two main reasons for this reduction in volatility

a. The increasing presence of DIIs since 2015

b. Lower inflation

What is your outlook on Nifty pre and post elections? Do you see Modi win getting confirmed?

We see the markets rising from these levels before the elections and continue their rally after that as well. Obviously, markets don’t go up in a straight line. There are bound to be bouts of profit taking which is healthy.

We do not comment politically but in my personal capacity as a market analyst, I see the BJP getting more seats than what they got last time in 2014, the setback in state elections, notwithstanding.

Within banks, is it going to be a broad-based performance or would it be private banking which will push the bank index higher? Can we see the PSU banks and the underperformers from year to date participate in that move?

While banks as a class grew at more than double the rate of the economy, we will suggest all-round participation. However, stocks like ITC, L&T, and Reliance will contribute more.

Public sector banks could outperform the markets in the shorter run, but long term play will be the private sector banks, which are weaning away market share from them.

What is the sense that you are getting when it comes to IT? Do you believe that it will continue to outperform?

It will be difficult for IT to outperform in a manner in which it did in 2018. But it will act as a good alternative for sectoral rotation as and when needed.

The larger IT companies like TCS and Infosys have size and visibility on their side, which will continue to attract portfolio hunters. The sector will act as a stabilising factor in any portfolio.

First Published:Mar 11, 2019 8:58 AM IST