Economic revival will be the single most important factor for markets in 2020, however, globally the US-China trade deal negotiations and the US presidential election will have an impact on the markets, said Naveen Kulkarni, head of research at Reliance Securities in an interview with CNBCTV18.com. He also said that his Nifty target for 2020 is 13,900 and banks will continue to be the most critical sector in the coming year. Edited excerpts:

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The year is coming to an end, with both indices at all-time highs. Looking back at 2019, was it what you expected?

The beginning of the year was challenging but a thumping victory for the ruling party helped the markets. But the challenges of an economic slowdown were quite evident. Thus, it was difficult to envisage that the markets would end the year at all-time high closing. However, the cut in corporate tax rate and constructive global environment have been the key factors for the market to touch all-time high levels.

Markets are at record highs, while the economy is not doing well. What is your reading?

While the economy is not doing so well, the corporate profits, especially for the banking sector, is improving. The cut in the corporate tax rate has further improved visibility. For markets, the single most important factor is corporate earnings and that has shown signs of improvement. Thus, we see positive traction in the markets.

For 2020, what factors, global and domestic, will shape the year?

Economic revival will be the single most important factor, however, globally the US-China trade deal negotiations and the US elections will impact the markets.

What is your Nifty and Sensex year-end target for 2020?

Our Nifty target for 2020 ending is 13,900.

2019 was a year of large-caps, with the midcaps underperforming. Do you think this trend will change in 2020? What are your top pics in the midcap space for 2020?

Market volatility has been reducing and this typically aids the midcaps. The year 2020, should see quality midcaps doing well but demand revival will be a critical factor for midcap performance.

What sectors would you look out for in 2020 and why?

Banks will continue to be the most critical sector in 2020 as earnings growth will be driven by the banking sector. The sector could also see the impact of resolutions. Apart from banking, automobiles will be a key sector as it will be the barometer of demand revival. Telecom and metals will be the other key sectors to watch out for as they are seeing positive pricing traction.

Can you name some of your top stock picks for 2020? What kind of stocks should investors focus on?

In banking SBI and Axis Bank are our top picks. In automobiles, we find Ashok Leyland and Escorts attractive. Apart from these ideas, we are bullish on Coromandel International, Trent and Aarti Industries in the midcaps. Bharti is our top idea in the telecom space.

Do you see an earnings revival in Q3 after a muted show in Q2, or will it remain on the same lines? Can you name some sector you expect to outperform?

Q3 will not see a significant earnings revival but should see signs of improving operating performance. Banks will continue to be the key.

Banks have been the biggest value creators, they have the highest weightage on both the indices. How long can this dominance last?

India still has a long way to go for the penetration of financial products. Banks have the requisite reach to deliver these products. Thus, banks will continue to be some of the biggest wealth creators in the forthcoming years.

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