After falling around 8-10 percent from record highs, Ambit Capital feels the market is still far away from its fair value. “We could see double-digit earnings growth in the current fiscal. If you factor that in, the Sensex at 30,000-31,000 is where fair value is.
some challenge on the margin front for mid- and smallcap companies. “While topline growth has been buoyant, operating margin slippage has become the norm for companies, especially in the case of midcaps and smallcaps. This could translate in tough time for these stocks going forward.
quickly adding that 2018 will see a flight in capital to largecap names. “Rise in the cost of capital is resulting in a pull out of capital from riskier stocks, leading to a greater flight on largecap names. The cost of capital could see another boost from our expectations of three rate hikes by the Reserve Bank of India (RBI) this year.”
This could exert fiscal pressure due to higher minimum support prices as well as oil, among others. The government could probably hold its nerve till a month prior to the assembly elections. If oil prices have not pulled back by then, excise rates could see a cut.
One could look at metals and mining along with stocks that are a play on exchange rates. The rupee is under pressure against the dollar and it may not come down soon, so IT and pharmaceuticals could benefit from this fall.
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