NEW DELHI: The domestic equity market is likely to remain under pressure over the next few months ahead of a likely rate hike by the US Federal Reserve in December and a possible earnings downgrade in the second half of this financial year.
Mahesh Nandurkar, India strategist of CLSA, believes after the election of Donald Trump as US President, there are higher chances that the Fed will hike interest rates in December. Back home, demonetisation of Rs 500 and Rs 1,000 currency notes may put some pressure on the real estate, consumer discretionary and auto sectors.
While the demonetisation scheme will contain corruption and improve tax compliance, it will hurt near-term growth. “The reform momentum should help create a base for the revival of a more sustainable longer-term growth,” CLSA said.
Overall, the global financial services firm is bullish on the domestic equity market for the long term and sees the Nifty50 around the 9,500 level by the end of November 2017.
CLSA expects some downgrade in the corporate earnings growth in the second half of 2016-17 from 17-18 per cent to 12-14 per cent.
However, it predicted double-digit growth in earnings in 2016-17 and is bullish on stocks like ICICI BankBSE -5.32 % and HDFC BankBSE -0.04 % with target prices of Rs 320 and Rs 1,530, respectively.
IndusInd BankBSE -1.78 % (target price Rs 1,500), Reliance IndustriesBSE -0.85 % (target price Rs 1,350), PowerGrid (target price Rs 215), HCL TechnologiesBSE -3.11 % (target price Rs 1,050), Ambuja CementsBSE -4.88 % (target price Rs 300), Sun PharmaBSE 3.30 % (target price Rs 1,050), Vedanta (target price Rs 275) and Zee EntertainmentBSE -4.88 % (target price Rs 645) are among other stocks CLSA is bullish on.