The worst is over for the industry as lingering tension of pricing war, and AGR dues have subsided to some extent
Stock markets started touching new highs with the beginning of the new year. In fact, markets have already turned volatile with participants guessing what's in store ahead of the Budget 2021. Starting today, for the next three days, Outlook Money brings you expert opinions on how markets are predicted to behave over the next year.
In the first part, we present views of Ajit Mishra, VP, Research, Religare Broking.
How do you see the markets perform in 2021?
Markets have been continuously touching newer highs led by strong liquidity flow, supportive global cues, positive news on covid vaccines, and the US stimulus announcement. However, consolidation at the beginning of the year cannot be ruled out as valuations are already stretched.
Nonetheless, we expect to see a decent performance given the overwhelming liquidity support from central banks, which is likely to continue in 2021. We believe improving India's fiscal position, and non-performing asset (NPA) situation would boost sentiments on the domestic front. Besides, the Union Budget, earnings are important events for investors, and a positive outcome would aid further support. Put together. We expect markets to do well in 2021.
Which sector will be in demand and why?
Considering the recent sharp run-up and stretched valuations, we would bet on the telecom sector. We believe the worst is over for the industry as lingering tension of pricing wars and AGR dues have subsided to some extent. The long-term growth story remains promising for the industry, thanks to increased digital and mobile penetration following the pandemic that forced people to stay indoors.
Which two stocks will be benefited from this sector, and why?
Bharti Airtel has a high potential for outperforming its peers in 2021. The company has a strong and growing customer base. It also leads the industry in Average Revenue Per User (APRU). Further, it has become increasingly clear that ARPUs need to increase if they need to continue investing in new technologies. A rise in ARPU would aid better profitability for Bharti Airtel. Further, its valuation appears attractive at these levels.
Our second pick is Reliance Industries. Though it is not a pure telecom player, its telecom (Jio) and retail businesses have helped the company post decent financial results. Its management plans to grow the company which has also received an overwhelming response from foreign investors, increasing its valuation. These segments will continue to perform well with growing demand and a growing customer base in the coming years. Additionally, with improving economic conditions and demand, its core business—refining, will also pick up a decent pace. We thus suggest accumulating it in a staggered manner for the long term.