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D-Street expects moderate index returns in 2020, financial stocks most preferred

Mumbai: Brokerages see high probability of moderate returns for the Indian equity market in 2020 amid stretched valuations, likelihood of economic slowdown continuing and limited room for fiscal stimulus by the government. BNP Paribas has an ‘overweight’ stance on the Sensex and expects the benchmark to reach 44,500 in 2020. Maybank Kim Eng is ‘neutral’ on the Indian stock market in 2020 with a base case Nifty target of 11,600. ICICI Securities has a December 2020 target of 13,100, saying that the sharp run-up in the market since August has reduced return expectations for 2020.

BNP Paribas

The firm has an overweight stance on Sensex and expects it to reach 44,500 in 2020. BNP expects further cuts in India’s GDP growth estimates as the consensus estimates do not seem to reflect the recent deceleration fully. The room for the government to do fiscal stimulus through increased spending or further tax cuts seems limited due to stretched fiscal position, said BNP Paribas. Private investments are unlikely to pick up anytime soon and asset quality pressure on financials does not appear to be behind yet, said BNP. The brokerage is overweight on India despite macro-economic headwinds because Indian equities are one of the rare compounders in Asian markets. Ease of stock selection and availability of diverse range of sectors to invest remain bright spots, said BNP.

Investment picks: Private banks, insurance, frontline IT companies and investing in undervalued rebounders.

Maybank Kim Eng Securities

The brokerage has neutral view on India for 2020 with base case Nifty target of 11,600. While macro outlook on India is clouded, the brokerage is bullish on private banks, telecom companies, cement, power and gas utilities, software and tractors. A more broad- based participation of stocks and sector rotation is a more likely trend in 2020, said Maybank Kim Eng. The brokerage’s bull case target for Nifty is 13,400 and bear case is 9,900. The government’s bold actions in the Budget in February 2020 may bring positive catalysts such as fiscal expansion to carry out capex and cut in personal income tax/GST, said Maybank.

Investment picks: ICICI Bank, Axis Bank, Bharti Airtel, Power Grid, UltraTech, Mahanagar Gas, Dalmia Bharat, Mahindra, HCL Tech, Mphasis and Tech Mahindra. Maruti Suzuki and Tata Motors are top sell recommendations.

ICICI Securities

The brokerage has a Nifty target of 13,100 by December 2020. Absolute returns for the Nifty in 2020 will be constrained by the sharp run-up in stocks during the fourth quarter of calendar year 2019 which has stretched valuations, said ICICI. Skepticism towards risk assets could continue in 2020 as global central banks’ appetite for gold continues especially in an environment of negative rates in developed economies, said ICICI Securities. The brokerage has an overweight stance on financials, consumer discretionary and industrials.

Investment Picks: Bandhan Bank, IndusInd Bank, Cholamandalam Finance, LIC Housing, HDFC Life, SBI Life, Jubilant Food-Works, Westlife, Trent, Greenply Industries, Dabur, Balkrishna Industries, TVS Motor, L&T, Engineers India, Bharti Airtel, GGL, GSPL, Dr Lal Pathlabs, Tata steel, UltraTech, and Shree Cement.

Credit Suisse

The financial services company expects India’s economic slowdown to continue in 2020. Credit Suisse expects narrow market performance to continue for now as economic uncertainty continues to push funds into the ‘safe’ stocks. “Till growth uncertainty continues (we expect for another six months), we expect this “quality bubble” to stay inflated and market concentration to remain high,” said Credit Suisse. Equity flows have settled at higher-than-historical average levels and foreign flows should continue to support the market, it said.

Investment picks: SBI, ICICI Bank, ICICI Prudential Life among financials, Bharti Airtel in telecom, Power Grid among utilities and Tata Steel among metals. The brokerage has a minor overweight on pharma and IT.

Source: Economic Times