Economic recovery, healthy corporate earnings to drive equities in Samvat 2078

Mumbai, Nov 5 India's key equity indices are expected to be driven by economic recovery as well as healthy corporate earnings during Samvat 2078, experts opined.

The Hindu New Year Samvat 2078 has started. A special hour-long session was held on Thursday, Diwali day, to mark the start of the new year for the domestic equity market.

In Samvat 2077, both the Sensex and Nifty delivered around 40 per cent returns.

"Healthy corporate earnings, high forex reserves and economic growth should support the market in Samvat 2078," said Anuj Gupta, VP, IIFL Securities.

According to Krishna Kumar Karwa, Managing Director - Emkay Global Financial Services: "Macro headwinds like high oil prices, supply chain disruptions, the debate on transient versus structural inflation, the possibility of hardening interest rates across the globe, internal economic challenges in China and its global ramifications, and the ongoing US-China spats will keep global and local markets volatile."

"The markets are currently not fully discounting these headwinds but having said that stocks will track earnings and valuations, and to that extent companies whose stock prices are reflecting the optimistic outlook 3-4 years down the line are most vulnerable to price and time corrections."

In terms of expected sectoral growth, Motilal Oswal Financial Services' Head of Retail Research Siddhartha Khemka said: "Some of the themes which we expect to play out during Samvat 2078 are certain segments where we can see earnings normalisation with improving economy, increasing spending to benefit companies in 'Technology, Travel, Tourism, leisure and QSR' segment."

"Real Estate and ancillaries like cement and other building material companies are also expected to witness increasing demand. Finally, stock selection was the key in generating returns within the 'Midcap' space during Samvat 2077 - a trend which we believe could continue going ahead as well."

On a cautionary note, Capital Via Global Research's Research Head Gaurav Garg said: "Samvat 2077 was fantastic for equity market. Market performed well and outstanding returns provided to the investors. The rally will continue in Samvat 2078. However, profit bookings will be witnessed in the starting of the year."

"Nifty could trade in the range of 16,000-22,000. Metals and Banks will remain in the focus."

Additionally, Geojit Financial Services' Chief Investment Strategist V.K. Vijayakumar said: "After the spectacular returns in Samvat 2077, investors should expect modest returns only, say in low teens, in Samvat 2078. This Samvat is likely to be very volatile, unlike last Samvat. Rising inflation would be the biggest known threat to the market. Rate hikes by the Fed can happen by end 2022 or, perhaps, earlier than that if persistent inflation and the bond market force the Fed's hands."

"Rate hikes by the Fed will lead to some capital flight from emerging markets like India and this is likely to trigger some sharp correction in the market. But the correction may turn out to be low and short-lived if the economy rebounds smartly."

In addition, he pointed out that sectors like metals, realty, IT, banking, financials, Telecom and capital goods are likely to perform well.

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