Economy may pick up in first half

1. Economy May Pick
Up in First Half
Top money managers and brokers say Indian
equity markets are likely to shrug off an
imminent Fed hike and disappointment over the
tepid pace of reforms

2. Contd…
Getting Fed Up? Sensex may Rise to 30k in 2016 Indian markets could shrug
off worries over a rate increase by US Fed Reserve and the tepid pace of
reforms and reclaim the 2015 all-time highs late in the new year, an ET poll
of top money managers and brokers has found.
The Sensex could rise 8% to touch 27,000 by March 2016 and scale the
30,000 peak by December 2016 as foreign fund flows surge, majority of
participants in the poll said. The Sensex has slipped 17%, or 5,000 points,
from its all-time high of 30024.75 in March this year amid worries over the
pace and quality of earnings growth and the shock delivered to global
financial mar kets by China's yuan devaluation and the commodity price
plunge. The index is on track to post its worst annual performance in four
years this year, and foreign funds have sold `. 30,000 crore of shares since
August. A majority of poll respondents said the trend could reverse in 2016.

3. Contd…
“We expect economic activ ity to start picking up from 2HCY16 (second half
of calendar year 2016) as the government's efforts to address some of India's
legacy investment issues start taking effect and believe 10-15% returns (are
possible) in equities in 2016, unless earnings disap point again,“ said Sanjeev
Pra sad, co-head (strategy), Kotak In stitutional Equities. “Several high-
frequency indicators like indirect tax collections, power generation, coal
production, pet rol consumption, passenger car sales, new job initiations and
aviation passenger traffic are showing up.“
The rally will be led by beaten down large-caps, but midcaps and small-caps
will also participate despite high valuations. About 83% of those polled
expected the midcap rally to continue. Though corporate commentaries
remain depressed, growth revival seems to be round the corner, some of the
participants said.

4. Contd..
“We are nearing the end of earn ings downgrade cycle and the current volatility is
offering an entry opportunity for investors with long horizon,“ said Navneet Munot,
chief investment officer, SBI Mutual Fund.
RUPEE MAY DEPRECIATE
Half of the participants foresaw the rupee depreciating another 5% against the
dollar, to 70, by March 2016 while 28% predicted the Indian currency would
consolidate at 66-68 levels. The rupee has been under pressure for the past few
weeks as global fund flows have shifted to US bonds in search of higher yields.
The primary markets could con inue the revival in the new year after a sterling
performance in 2015, when nearly ` . 14,000 crore was raised -the best since 2010.
The goods & services tax (GST) Bill may not be cleared in the win er session of
Parliament and this could affect markets in the short erm, the participants said.
About 67% were pessimistic about the passage of the Bill and 49% said stocks could
fall by up to 3%.

5. Contd…
But a super majority, about 88%, believes the GST Bill's failure will not affect
markets in the new year as foreign fund flows in 2016 may outpace the
inflows in 2015.“I don't think the world is coming o an end because there is
no GST Bill, though the long-term impact of legislation is going to be
massive,“ said Raamdeo Agrawal, oint managing director, Motilal Oswal
Financial Services. “I hink there is no reason for a massive selloff, because
the markets have not actually built in the passage of GST Bill.“
Three-fourths of the poll partic pants said the Fed may raise rates 25 basis
points this week and the market has already discounted it.
“We expect the volatility to subside once the event is behind us,“ said Munot
of SBI.

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