Nifty back at 11,000? Not in 2018; Investors will have to wait, says ICICI Pru’s Yogesh Bhatt

The benchmark indices BSE Sensex and NSE Nifty 50 delivered good returns of upto 28% in 2017 and continued to conquer new highs in the first month of 2018. The Nifty 50 of the National Stock Exchange recorded a high of 11,171.55 on January 29. However, the stock markets have been on a correction mode ever since the January highs. The Nifty 50 is testing the level of 10,800.

While both domestic and global factors continue to drive the stock markets, how soon is the Nifty 50 expected to reconquer the 11,000-mark? In an exclusive interview with Porisma P Gogoi of FE Online last week, Yogesh Bhatt, Senior Vice President, Investments, ICICI Prudential Mutual Fund, said the Nifty 50 will not go back to its record levels very soon, at least not in 2018. Here are some edited excerpts.

What is your near-to-long term view on the markets?

After really good returns last year, the markets are right now consolidating I would say. There are a lot of worries here in the market in terms of crude oil prices, US interest rates, likely elections in this coming year, as well as what is going to happen between US and China as far as trade is concerned. Volatility is there for all these reasons. However, we don’t think so that it will last forever. There will be alternate bouts, which will come positive and negative, which will create volatility. Hence, we are recommending investors to practice and execute the ‘asset allocation plan’.

Do you foresee a very big correction in the markets in the near-term?

I don’t think there will be very big corrections because I feel that there is a strong domestic liquidity in the market right now in terms of mutual fund flows. Almost Rs 7,300 crore of SIPs are booked every month which are kind of giving a strong support to the market. Hence, even if there is a big negative news, you will see markets correcting maybe 2-3% or 5%. Then it comes back again. Hence, I don’t see that markets can correct hugely negative unless there are some geopolitical tensions or trade wars — which are unforeseen events.

Will Nifty reclaim the 11,000 mark in 2018?

Definitely, it will go back to that level. But not this year. The trajectory is there. We are still into the bull market because we are just 4% away from the all-time high number of 11,200.

What will be the risks for the Indian markets going forward?

The only risk India is facing right now is if crude prices go above $80. That is where you will see some more correction and some more yields going up.

You seem extremely bullish on the healthcare and IT sectors. Are you bullish on other sectors?

Other than these two, we are also bullish on the consumption sector. We feel that the Indian market and the large population which we have is increasing per capita income of India, which is $1800 dollars. FMCG (fast moving consumer goods) plus consumer durables, and to that extent even auto — which is so-called consumption sector — would be definitely there to playout for decades.

What are your views on the banking sector?

Right now, it is very patchy in that particular sector. Though the valuations have corrected to an extent, but we feel that there is still time to go all hogged about this particular sector.


What has happened within banking is ‘polarisation’. There are certain segments of retail banks which are very expensive. The entire corporate banks’ books and PSU banks have become very cheap. So I would say that we are betting on this corporate recovery thing, but we will try and avoid some retail banks which are expensive. The entire banking is definitely not a ‘thumping the table’ by as of now.

What would be your advice to retail investors given the current situation?

They should look at some defensive sectors right now which are IT, pharma and some of these banking recovery stocks, plus the consumption sector. Power as a sector is also very interesting right now.

What is your view on mid-cap and small-cap stocks?

We are very clearly recommending investors not to put any lump-sum money in mid and small caps right now. Though there is a correction which has happened in the last five months, so typically it has underperformed the Nifty by 14 per cent. But we still feel that the valuation gap between mid-caps and small-caps and the large caps are still very wide, and hence we are not recommending any lump-sum investment. But yes, definitely after this correction, investors can start real long-term SIPs into small-caps if they want.

Would you recommend investing in large caps?

Large caps are attractively valued. Within equity, we would definitely recommend large caps over mid and small caps.

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