North korea remains a concern for markets; gold likely to glitter more dhananjay sinha – future of marketing communications


The concerns on market valuation have been persisting with markets trading at boom time, along with that the risk of geopolitical disruptions and protectionism etc. remains, Dhananjay Sinha, Head of Research, Economist and Strategist at Emkay Global Financial Services Limited, said in an exclusive interview with Kshitij Anand of Moneycontrol.

Q) The geopolitical tensions especially emanating from North Korea weighed on D-Street as well as markets across the globe us stock futures marketwatch. Do you think this is just a knee jerk reaction or chances of deeper correction cannot be ruled out if it escalates?

A) The concerns on market valuation have been persisting with markets trading at boom time. The valuations across both benchmark and broader indices while the fundamentals reflect earnings recession.

Importantly, with volatility measures still very depressed, markets appear to be complacent.

Clearly, there is a possibility of a correction if any of these events go out of hand.

The possibility of USD regaining its recently lost strength or higher treasury yields can trigger the fear factor as well jpy usd exchange rate. But, unless there is a big flair-up in global risk factors, the possibility of an outright crash is slim at this juncture.

Narrowing liquidity arising from normalization is increasingly becoming a reality across US, Europe, and Japan. However, it will still be very gradual, lagging behind the inflation trajectory, sufficient to revive growth.

Q) The June quarter results failed to lift investor sentiment 1 aud to usd. When do you see a recovery in earnings on D-Street? Earnings recovery is seen as the next big trigger which could lead the next leg of the rally. Do you agree?

A) Earning misses has been a phenomenon since FY08 which is good long 9 years gold forecast. Average growth since FY08 for benchmark indices has been 5 percent. Over the past three years, there hasn’t been any growth.

The fact that there was a decline in earnings in Q1FY17 is not a surprise. The lingering impact of demonetisation still remains and the GST implementation has further compounded the slack.

With this, the consensus earnings expectation for FY18 has also been toned down from 20-23 percent for Nifty companies at the start of the year nzd to usd converter. I think a realistic expectation will be just about 5-10 percent.

The key to improvement in earnings in the second half of FY18 will be the impact of huge front loading of government spending. The persistent fragility of the PSU banking sector and its eroded capital condition also remains a drag on the economy.

Q) How should investors plan their investments when markets are doing 1 step forward and 2 steps behind? Does it make sense to hold cash at current levels and deploy when some clarity emerges?

A) The clarity is very much in favour of sector relating to consumption, agri and rural oriented sectors gbp usd chart live. Investors should study companies in these space for earnings visibility and use near term correction, so deploy cash.

A) Demand for gold should improve with the thrust of government spending in the rural and agri sectors. Already, the Q1FY18 GDP data released last week has seen flows into valuables trebling over last year in real terms.

Possible recovery in US dollar following a steep correction since early 2017 is a potential negative risk for global gold prices binary search example. But, when we look at domestic gold prices — that will be nullified by possible INR depreciation.

Q) Market rally has already got many stumped kwacha to usd. India is one of the best-performing markets globally. What are the reasons which you attribute for the current outperformance which will remain valid for the future as well?

A) Indian markets have been increasingly being guided by rising participation of retail investors in the equities. Since May 2014, net flows into mutual funds has averaged at Rs Rs5,500 crores per month and post demonetisation it has further increased to around Rs 10,000 crores.

This is also reflected in the rising proportion of mutual funds in the secondary market turnover funny quotes with pictures. As a result, the mid cap and small cap indices have we performed the benchmark indices.

This is abnormal as historically, the broader markets trade at a discount of 10-15% to benchmark indices to capture the liquidity risk convert usd to cny. Clearly, while global momentum has sustained the benchmark indices at high levels, the peak valuation of mid-cap and small cap stocks have been driven by domestic flows.

While many have argued that recent influx of retail flows are structural in nature, historical trends since 1990 indicate that retail exuberance has mostly been cyclical, driven significantly by market momentum.

A) FII flows have been less consistent since early 2015 and there are bouts of major inflows and outflows. FII participation was far more consistent prior to 2014 indicating that the first leg of the bull market since 2009 was captured by global investors.

The second phase since May 2014 has been dominated by domestic flows. The recent decline in FII flows has been driven by concerns on valuations and their lack of participation in mid-cap, small-cap space.With FII flows still being a significant driver for markets it will be crucial to watch this space going forward.

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