Market wishlist for 2016: GST, more rate cuts & return of FPIs

Friday, Jan 1, 2016,11:31 IST By metrovaartha A A A

New Delhi | Passage of the long-pending GST bill, lower interest rates and a bounce-back in the foreign portfolio investments, as also a stable rupee and good monsoons, figure high on the New Year wishlist of Dalal Street to help it regain the 30,000-point milestone.

It was a roller-coaster ride for the stock market in 2015 where the benchmark Sensex lost 1,381.88 points or 5 per cent, after gaining nearly 30 per cent in 2014. The index had last registered a yearly loss in 2011 when it fell 24 per cent. It also came off sharply after peaking above 30,000-points mark, a milestone it crossed in March but could not retain.

According to Bonanza Portfolio’s Associate Fund Manager Hiren Dhakan, GST Bill being passed in the Parliament, further rate cuts by RBI, stable Indian rupee against the US dollar, no further devaluation of Chinese Yuan, normal monsoon, fresh policy measures by the government to promote foreign investment and stable oil prices are the markets’ wishlist for the new year.

GST, which seeks to simplify and harmonize the indirect tax regime across the country with a single uniform rate, has been stuck for a long time in a political gridlock.

Passage of the GST bill is likely to be the priority for the government in the New Year. Government spending towards infrastructure and ease of doing business will be other wish list which will be keenly watched. As inflation trajectory continues to be low we can expect 2-3 more rate cut decision by RBI during the later part of 2016, said Vinod Nair, Head Fundamental Research, Geojit BNP Paribas Financial Services.

As far as FIIs flow is concerned, world liquidity hunts for the best opportunities in the market and India is amongst the finest economies in the EMs available at fair valuation, Nair said.

Last year also saw the worst single-day performance by the Sensex on August 24 when it fell sharply by 1,624.51 points or 5.94 per cent triggered by a Chinese rout.

Delay in key reforms including GST, global headwinds and uncertainty about an interest rate hike in the US, had kept the markets on the edge in 2015.

Passing of key reform bills like Goods and Services Tax (GST), increased capital expenditure by companies, increase in inflow of foreign money, good monsoon, improved macro-economic condition, improvement in consumption demand, strengthening of rupee against dollar, said Gaurav Jain, Director of Hem Securities.

Analysts said that GST Bill passage and the Union Budget would be the key triggers for Indian markets in the New Year.

“Fed rate hike was already been discounted by the markets hence we have not see any major volatility in the markets post the US Fed announcement. We do not see any immediate impact of the same, going ahead. Future expectations on rate hikes will be triggered by the data which comes up over the next few months in the US,” said Kamlesh Rao, CEO of Kotak Securities.

2015 has been extremely eventful for the stock market. The markets hit an all-time high with the Sensex and the Nifty surpassing the 30,000 and 9,000 levels, respectively, despite several odds such as deficient monsoon, shaky global markets and subdued corporate earnings, he added.

We see the Indian markets gradually gaining steam as earnings numbers of India Inc improve and global market fears fade away. We expect the Sensex to remain in the range of 26,000-29,500 in the year 2016, and Nifty in the range of 8,200-8,900, Dhakan said.

Krishna Kumar Karwa, MD, Emkay Global Financial Service said: In the most likely scenario, earnings growth may still remain modest in 2016, but better than 2015. With state elections lined up in the next 24 months, political developments can also have bearings on market sentiment in short term.

Market experts said that expectation is bright on the New Year. Prospects favor India on hopes of FII inflows returning, an inspiring Budget and corporate earnings reviving with gradual improvement in consumption.

We expect Sensex to be around 30,000 by end of 2016, a growth of 20 per cent in current level, said Shrey Jain, CEO of SAS Online. We believe 2015 was a year of correction for stock markets. We see it as a part of life circle where correction time is repeating itself after two consecutive years. But Indian economy is a success story and Sensex has to see new highs in coming years, he added.

Some crucial bills are on the table and with the nod in the Parliament, a new growth story is waiting to be written. Majority of the BSE listed companies have indicated that earnings will improve next year, which will set the stage for gains, Jain added.
On the sectors that are likely to do well in 2016, Dhakan said: IT, pharma, FMCG and auto are expected to do well in 2016. IT and pharma are expected to do well on the back of stronger dollar. Auto sector would be the major beneficiary when RBI cuts interest rates further.

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