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What are the next triggers for the markets?

Thursday, April 13, 2017

Markets are at all time high, retail investors are skeptical whether to put money or withdraw. What are the next big triggers for the markets, which industry, sectors to focus on?

Yes markets are at almost all time highs and one need to follow a cautious approach but there are still plenty of stocks available which can give 15-20% kind of returns which is better than any other assets class. I will put my discussion by highlighting near term triggers for the markets and what should retail investor look for.

Near Term Triggers for the markets:-

1.     GST: It is almost certain that GST will be implemented from July 1, 2017 onwards, Sectors like FMCG, auto, cement, light electrical, multiplexes, retail and logistics could be some of the key beneficiaries of India’s biggest tax reform.

 2.      Q4 corporate results: This is most important trigger as it will show real impact of demonetization. The expectation is that the Banks especially private sector will do well, also other sectors will do better than previous quarter and overall recovery in earning is expected.

3.      Domestic flow: Retail investors are continuing putting money in equities through SIP, so even FIIs are seller domestic institutions are buyers. The options for investing in other assets classes are very limited and the similar or higher flow is expected to continue from domestic institutions in equity, this will drive the markets further high and by Diwali Nifty is expected to cross 10000 mark.

What should retail investors do?:

1.      Revisit the portfolio and continue to hold good quality companies, this is the time to have large caps and good potential midcaps in the portfolio. SIP is the best way either through Mutual Fund or direct equity.

2.      Government focus on affordable housing is there so all the stocks connected with housing will perform better in the coming year which includes cement, tiles, building material, paints, Housing Finance, ceramics etc.

3.      Avoid buying based on tips or market rumors, do proper homework before taking investment decision. If one does not understand direct equity the best way to go is through mutual fund through SIP. The below will give you a SIP return performance of few funds:-

  SIP return %
  1 year 3 year 5 year 10 Year 15 Year 20 Year
Birla Sun Life Advantage Fund 26.13 18.59 23.34 16.15 17.59 18.57
Franklin India Prima Fund 32.02 21.74 27.71 21.41 22.6 25.2
Franklin India Prima Plus Fund 20.39 14.51 19.53 16.26 20.33 22.56
SBI Magnum Multiplier Fund 22.39 14.92 19.89 15.69 21.12 18.98
Tata Balanced Fund – Regular Plan 15.91 12.22 17.36 15.77 18.16 18.29
UTI Equity Fund 16.21 10.41 15.35 14.49 17.44 16.62

Few potential midcap Stocks to watch out for:

Somany Ceramics, Future Consumer, NBCC, Indiabulls Housing Finance, Pidilite  Industries, Maruti, Westlife Devlopment & GSFC.