Nifty may slip below 10k by March: Dharmesh Kant, IndiaNivesh Securities

Kant said the Automobile space was at a disruptive stage and a steep correction in stock prices might see some value buying in this segment

The government has finally acknowledged there's a slowdown in the Indian economy and has announced several measures to revive growth. However, these steps have failed to cheer investor sentiment. Dharmesh Kant, Head of Retail Research, IndiaNivesh Securities tells Chirinjibi Thapa that the current slowdown will take its time and all the government needs to do is stay consistent in terms of policies and provide a level playing field for foreign portfolio investors (FPIs) and industry. Edited excerpts:

Why are markets struggling to recover despite recent measures by the government? Where do you see the Sensex, Nifty by December 2019 and March 2020?

Markets are all about future growth projections and historical numbers. Presently, both are gloomy. Earnings have been faltering and so is the hope for a speedier recovery. Q1FY20 earnings were a big disappointment, rather a confirmation of slowdown. Management guidance across the board indicated further pain ahead. Global economic uncertainty and slowdown added to the woes. We expect Nifty to end the year around 11,000, plus-minus 200 points. Having said that, the first half of 2020 looks real tough and I won't be surprised if Nifty cracks below 10,000 by March 2020. 

Weak auto sales data, GDP numbers, GST mop-up all indicate a slowdown. What's the quantum of rate cut the RBI may go for in the light of these developments?

The RBI has cut repo rate by 110 basis points since February 19. By 2020-end, we expect, at best, 65 basis points of more cuts. I don't see repo-rate going below 4.75 per cent by that point.

What else is needed to spur growth and revive investor sentiment?

Given the various push and pulls, I think the best measures are already in place. This slowdown is a process which will take its own sweet time. Having said that, the only expectation is the consistency of policies. No need for trial and errors or ad hoc measures. What industry and foreign portfolio investors (FPIs) want is a level playing field and consistent policies.

What should retail investors do in times like these?  Do you recommend buying into mid-and-small caps at these levels?

Systematic Investment Plans (SIPs) are the best and safest mode for retail investors. Would like to see Q2FY20 earnings first before deploying fresh money into equities.

Your view on banks and non-banking financial companies (NBFCs), especially after the public sector banks merger? Should investors still stick to private banks?

Private banks remain the best bet. The PSU banks merger will need at least a year’s time before synergies kick in. Liquidity has been tight for NBFCs and is likely to remain so in the foreseeable future. Private banks tend to benefit the most in such a scenario, grabbing opportunity loss of NBFCs and PSU banks.

What's the way out for the auto sector from this downturn? Are these stocks a contrarian bet from a 12 - 24 month horizon? Your best bets in the segment?

The Automobile space is at a disruptive stage. There are many moving parts, be it e-vehicles, hybrid vehicles or much-awaited scrappage policy for old vehicles. In the medium-to-long term, given the steep stock price correction in almost all automobile manufacturers, we do think some value buying may emerge in this space, particularly in entry-level segments of two and four-wheelers. Hero Motocorp is the best investment buy among the lot. 

Does the upcoming festive season hold any promise for the consumption sector? What are your estimates for corporate earnings growth for FY20?

On a year-on-year (YoY) basis, it will be a struggle for the consumption sector, festive season notwithstanding. Nifty50 is likely to deliver higher single-digit earnings growth for FY20.