2019 is the year for accumulation, probability of big fall low: Narnolia

There are not much of leveraged positions by traders in the market. So probability for any big correction in 2019 appears low. 2019 is more of an accumulation phase for harvesting thereafter, Shailendra Kumar, Chief Investment Officer, Narnolia Financial Advisors said in an interview to Moneycontrol's Sunil Shankar Matkar.

Edited excerpts:

Q. Auto stocks corrected significantly in 2018 and now Maruti Suzuki, Eicher Motors, Tata Motors December sales numbers added to investors disappointment. What is your expectation from the space in 2019?

A. December is cyclically a weak month for auto sales. This time it got even worse as dealers were carrying large stocks after poor festival season sales. Rural demand had been a strong driver for auto volume post GST related trade channel disruption but there are concerns building up there.

At the same time, high competition in the marketplace negates the possibility of price rise barring some on account of new emission norms. Going forward auto volume growth will remain in single digits only and pricing growth too will be absent. The saving grace for the sector would be margin revival if commodity prices remain benign.

Q. Do you foresee any big correction in 2019 after a positive close in 2018? What risks should investors stay wary of in 2019?

A. There are steady domestic inflows through mutual fund routes and that gives stability to this market. This fresh buying by retail investors is large enough to negate any sells that may be triggered by foreign investors on account of global concern in 2019.

Also, there are not much of leveraged positions by traders in the market. So probability for any big correction in 2019 appears low. Our base hypothesis for 2019 is that the volatility will fall in the second half of the calendar year and return would be benign but positive. Our near-term target for Nifty is 11,800. 2019 is more of an accumulation phase for harvesting thereafter.

Q. Analysts suggest public capex could continue next year due to general elections but private capex pickup will take time. What is your take on capex?

A. We are not seeing any such incrementally large move this time. The government would be tilting more towards some direct transfer scheme to appease voters than improving sentiments using infra capex.

Private capex is surely in a take-off mode as capacity utilisation has improved and post demonetisation and GST implementation related initial weakness, demand outlook is again improving.

Q. Which among largecap, midcap and smallcap will do good in 2019?

A. 2019 will prove to be a very neutral year in terms of various sub-segments of the market. Earnings growth of various cap, sector or themes will be very similar in 2019. Valuation differential, too, has narrowed for various sub-segments of the market.

And these two factors that mean that portfolio return this year would be more a function of stock selection skill than the exposure to a particular segment.

Source: https://www.moneycontrol.com/news/business/markets/probability-for-big-fall-in-2019-appears-low-bet-on-3-largecaps-2-midcaps-for-15-28-short-term-return-3368111.html

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