It promises to be a good year ahead for investors. Leading brokerages are cautiously optimistic on the equity market outlook for 2011, predicting an average upside of 18.33 per cent and an average downside of 8.33 per cent from the current level of the National Stock Exchange's (NSE) benchmark index, Nifty. This result is based on the expectations of nine leading brokerages.
The bellwether Bombay Stock Exchange's (BSE) Sensex closed at 20,028.93 points on Monday, while NSE's Nifty closed at 5,998.10. However, these were rounded off to 20,000 and 6,000 points for Sensex and Nifty respectively for Mail Today's survey of brokerages on 'Market Outlook-2011'.
Independent research firm CNI Research, has given the most optimistic picture for the market in 2011 by giving a ranges of 18,980-26,000 (5.1 per cent downside to 30 per cent upside) for Sensex and 5,700-7,700 (-five per cent to 28.33 per cent) for Nifty - lowest downside and highest upside.
Kishor Ostwal, chairman and managing director of CNI Research cited global recovery, higher liquidity (availability of funds seeking good investment opportunities), continued domestic growth fuelling higher corporate earnings growth as influential factors for the market in 2011.
On the other hand, SMC Global Securities fixed the downside at 15,000 for the Sensex, or about 25 per cent downside from the current level. However, it also sees the possibility of the Sensex touching 25,000-point mark on the upside. For Nifty it has given a range of 5,000-7,000 points (16.66 per cent downside and upside) for the next calendar year.
On the factors that would influence the course of market in the next 12 months, Jagannadham Thunuguntla, strategist and head of research of SMC Global said, "We have to keep a watch on international factors like falling Chinese real estate prices, Korean war, and sovereign debt crisis in Europe in the new year.
On domestic front, it needs to be seen how the corporate earnings would pan out in the wake of high inflation, leading to higher interest rates." Comparatively, the actual return on these indices have given in 2010, so far, seems rosier. Sensex has given a 14.48 per cent return, while Nifty has given a slightly higher return of 15.33 per cent till December 27 close.
Asked to pick three best stocks from each of the three categories - large-, mid- and small-cap segments - that could perform well during the coming calendar year, seven brokerages identified State Bank of India (SBI), Reliance Industries (RIL) and Rural Electrification Corporation (REC) from the biggies.
Three brokerages - Angel Broking , Kotak Securities and IIFL (erstwhile India Infoline) picked SBI as one of their best bets. Two brokerages each have picked up RIL and REC.
Dipen Shah, senior vice-president (PCG Research) of Kotak Securities terms SBI as the proxy to Indian economic growth, besides enjoying high level of cheap funds like CASA (current account and savings account) deposits.
Two brokerages - SMC Global and CNI Research - picked RIL as one of the big bets for 2011. Thunuguntla of SMC Global said that RIL, which under-performed during 2010 is expected to ramp up its KG basin gas capacity, besides continuing its global acquisitions.
On REC's strengths, IIFL said that it is power capex play, with strong traction in sanctions, stable spreads, robust asset quality and impressive return ratios. The other 14 stocks include four auto stocks - Maruti, Hero Honda, Bajaj Auto and Tata Motors DVR (Differential Voting Rights) - and three other banks, including Axis Bank, ICICI Bank and IDBI Bank.
Among the 39 mid- and small-cap stocks picked by various brokerages, only TRIL (Transformers and Rectifiers India Ltd) figured twice, highlighting the divergence of views on these stocks.
TRIL, picked by KR Choksey Shares and Securities and CNI Research, is a power transmission equipment manufacturer, with eight per cent market share in the segment.
The remaining 37 mid-cap and small-cap picks include prominent names like Tech Mahindra, TVS Motors, Crisil, Blue Star, Glenmark, Voltas, Bombay Dying, P&S Bank and Petronet LNG.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.
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