New Year Picks 2017 By Religare Broking

Going forward into 2017, with the Indian economy expected to be back on the recovery path from Q2CY17 onwards, as the liquidity crunch wanes away and the pent up demand comes back to the fore, we expect Indian equities to perform well too. Notably, factoring the impact on corporate earnings over the next couple of quarters and the fact that the market has also corrected, the Nifty currently trades at ~15x FY18E earnings. However, post the year-long volatility and finally ending 2016 almost flat, we believe the Nifty has the potential to scale new lifetime highs in 2017 post two consecutive years of negative / flat returns (2015: -4%; 2016: -1%). Having said this, the key risks at the current juncture remain the pace of remonetization and the actual impact of demonetization, the uncertainties surrounding the GST framework and its implementation, the state elections and their outcomes (particularly UP) and the pace / frequency of US Fed rate hikes.