After reacting strongly to the Union Budget, the Indian equity market is not showing much signs of revival. Naveen Kulkarni, Head of Research, Reliance Securities told Aparajita Gupta in an interview that the market will take time to rebound. Increase in taxation is a challenge but also uninspiring corporate earnings are a big sentiment dampener.
1. Following the Union Budget, both Sensex and Nifty took a plunge. When do you think it will rebound?
The market barometer, the BSE Sensex and the Nifty 50 index will take time to rebound. It is back to fundamentals, and market is focusing on corporate earnings and growth of India Inc. Both seem challenging at this point in time. So, markets could take three to four months to revive.
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2. Why is the market sentiment so down? What are the three main reasons for it?
Increase in taxation is a challenge but also uninspiring corporate earnings are a big sentiment dampener. The first quarter ended June 2019 earnings are quite uninspiring except for the banking sector. Also, the economic data is not showing any major signs of turn around. So, overall there are a quite a few challenges for the market sentiment to pick up.
3. What would be your suggestion for the investors?
Our suggestion to investors would be to invest in sectors with good earnings visibility, like banks, cement, infrastructure, capital goods and IT. Investors should not compromise on quality as companies with poor corporate governance standards see major corrections during times of liquidity crunch.
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4. From the perspective of the stock market, how would you rate this budget?
The Union Budget 2019-20 was balanced but increase in taxation and proposal to bring promoter holding down were the dampeners.
5. The LTCG tax is still prevalent. How much does that impact investors' sentiment?
In our view the impact is not very significant.
