Indian markets have run up sharply on hopes of that elections will deliver a decisive mandate and a stable government. Broader indices Nifty and Sensex have rallied close to 10 per cent in last three months whereas some sectors like banks, infra and realty have delivered far higher returns during the period. Bank Nifty gained 19.2 per cent, CNX Infrastructure rose 17 per cent and CNX Realty rallied 17.60 per cent in last three months.
Many analysts suggest taking some profits from some of the stocks in these outperforming sectors as there has not been any significant change in the fundamentals and the rally has been mainly on the back of expectations of economic recovery post-election.
Gautam Shah of JM Financial however sees formation of a classic bull market which he says is not going to end very easily as the momentum is very strong. “Every decline of 50-100 points is bought into,” says Mr. Shah.
“The breakout that markets has given above 6350 in March has all the characteristic of being genuine in nature….for this leg our target on the upside is 7400 to 7500, and we expect the same to be achieved in the next 4 to 8 weeks” said Mr. Shah.
Mr. Shah also said that there is no reason to believe why the markets cannot move 30-35 per cent from current levels, which turn out to a level of 8700-9000 levels on the Nifty. “After 2007 bull run, the market was in a 5-year consolidation phase and now market has broken out of that consolidation. Therefore, the bulls are taking out their frustration” said Mr. Shah.
Mr. Shah says in the medium term 6300-6400 would be a good support and for the short-term 6550 and 6640. If markets correct in the immediate short term on the back of sell-off in the global markets, then that should be used as a buying opportunity, he added.
Gautam Shah’s stock recommendations
He is bullish on oil & gas sector, saying that he expects the next bull run to be led by this sector.
Mr Shah also likes the banking space and his top picks are SBI, HDFC Bank, ICICI Bank and Axis Bank.
Among metals and capital goods stocks, he backs Hindalco, JSPL, Tata Steel, L&T and BHEL to do well.
He also suggested buying into midcap stocks and advised retail investors to go for midcap mutual funds rather than individual stocks.