Indian equities witnessed mixeds trend in 2018 on account of dominant issues pertaining to the global trade war and oil prices that occupied centre-stage throughout the year. The market witnessed a sharp sell-off during September-October 2018 on the back of the IL&FS fiasco and lingering liquidity crisis in the financial sector, but managed to gain some lost ground to end marginally positive.

In the early months of 2019, the market remained in a range, but as we approached the election results, volatility continued to increase and the markets hit new life-time highs upon the announcement of the exit polls results and a similar trend continued after the main election results were announced.

The return of the incumbent government with a resounding and decisive majority mandate was heartily welcomed by the markets, with both the benchmark indices (viz., SENSEX & NIFTY) hitting all-time highs.

Now that the election results are out of the way, the focus now shifts to more pressing domestic issues such as the NPA resolution, GST collections, trajectory of India Inc.’s corporate earnings growth, favourable monsoons and resolution of the NBFC liquidity issues. On the global front, the ongoing US-China trade war, sanctions on Iran and their impact on crude oil prices and the Federal Reserve’s stance on interest rates will also continue to have a lingering effect on our markets.

Therefore, notwithstanding the euphoria following the election results, brace yourself for periodic bouts of volatility for the rest of 2019, as the aforesaid factors are bound to gradually play out during the course of the year.

Currently, the stock markets are benefiting from good support on the liquidity front and are thus doing exceedingly well despite some early signs of an impending economic slowdown.

We expect the markets to be volatile this year with a reasonably good earnings growth in the range of 15% to 20% in FY 2020. Going ahead, the equity markets will remain volatile and will look forward to four prominent developments during the remaining months of 2019 –

• New Government’s budget and budgetary allocation to specific sectors
• Recovery in the private capex cycle
• Reversal in the interest rate scenario led by lower inflation and oil prices
• Global uncertainty due to trade war started by US against China

The markets may not go up in line with the earnings because the current valuations are relatively high compared to the long-term trend. Equity market large-cap indices can be expected to provide double-digit returns. An immediate improvement is required in the private sector investment cycle. Problems such as sluggishness in the real estate sector and NPA issues of public sector banks still persist.

On the positive side, insurance companies and domestic mutual funds are continuing to receive robust inflows. Markets may look less expensive once there is higher visibility on the corporate earnings / profitability front. In the past few years, we have seen some highly unique trends and foreign investors may display a tendency to stick to the comfort of the universe of large-cap index stocks.

We would require a genuine pick-up in real estate, capital investments and consumption. The rising deficits at the centre and at the state level would result in significantly higher issuances over the next year. Besides, India continues to remain increasingly vulnerable to external / global factors such as crude oil prices and global fund flows.

If a growth slowdown was to persist on a prolonged basis, there may be a possibility of one more rate cut by the RBI in the current financial year and a possible shift in its stance to “accommodative”. Besides, the debt markets are likely to remain volatile this year.

To sum up, volatility is a given this year. Trade and invest wisely!

Founded in 2005 by new–age entrepreneur Abhishek Bansal, the Abans Group has evolved into a globally diversified conglomerate, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management. The Group is a comprehensive financial and non-financial services and solutions provider, aiming to provide end-to-end solutions to its clients.