Diwali 2015 Mahurat Stock Picks By Kotak

A defining factor of the year has been the strong domestic flows into the markets, apart from continuing FII flows. Domestic institutions invested Rs.505 bn in equity markets. It is clear that, savings are finally moving to financial assets v/s physical assets earlier. Going ahead, in Samvat 2072, we expect fiscal reforms to pick up speed. Important legislations, especially GST, are expected to be passed, even if in a diluted form. Inflation has come off over the past few months and, we believe it will continue to trend lower. This opens up the window for more rate cuts in FY17.

We also expect continuation of the trend of domestic savings flowing into financial assets, including equities. Globally, growth rates in China are not expected to fall further, though recovery may be slow. The US economy will likely continue to grow and EU should stabilise. We hope that, the monsoons will be better next year, after two successive years of lower-than-average rainfall.

Given this backdrop, we maintain our positive bias towards domestic infrastructure and cyclical sectors over the medium-to-long term. We recommend sticking to quality and advise selectively investing in stocks having strong balance sheets and ethical managements. We are also positive on the consumption theme but will be buyers in most names, at declines. On the other hand, we are positive on select export-oriented stocks based on improving demand scenario in developed economies like USA. Key risks are geo-political concerns globally, decline in foreign inflows, sharp currency movements and spike in oil prices.

No doubt, there will be periods of uncertainty and anguish and concerns. There may be further correction in markets. However, we are hopeful of a rewarding Samvat 2072, after a flattish previous year.

MuhuratPicks2015