Indian Stock Market Outlook by Santosh Meena: TradingBells
The market is at an all-time high but both macros and micros are not supporting the current bull run where the current momentum in the index is majorly driven by global liquidity as global interest rates are falling. Trailing valuations and recent economic data are painting a gloomy picture about the economy but the market is a forward-looking animal and we may see growth recovery in the coming days. If we talk about corporate earnings then there is a slowdown in top-line but margin expansion is visible where if growth recovers then we can see significant improvement in profitability. Midcap and Small cap sectors are showing signs of bottoming out and trying to come out a bear market where they may outperform, once the growth visibility will be there. Midcap and SmallCap index may catch up momentum ahead of budget in February.
Most of the negative news is behind us and the market is looking ahead for a recovery in both domestic and global economy whereas activeness of government about economic reforms is a key catalyst for a current rally in the market along with global liquidity. Lots of pain in the financial sector has passed and there is a hope of decent recovery as the NPA cycle has topped out and earning may see an uptick from here.
The auto sector may not see V-shape recovery but there is a chance of U-shape recovery which also means the worst period in the auto sector is behind us as liquidity crunch is not big worry now and interest rates are coming down sharply.
The pharma sector is doing well as it has under-performed in the past four years and now there are some signs of earning recovery. Investors are looking value in this sector.
There is a frenzy move in telecom stocks as market is pricing in the worst scenario is behind us and tariff rates have bottomed out but there is always a regulatory overhang and there is always a risk of disruption due to technological changes. It is also capital intensive sector.