UBS Cautious Note

Projecting zero returns from the Nifty, Swiss brokerage UBS has projected a 10 per cent cut in its index target at 10,500 for calendar 2018, even as it remains positive over the long-term. "Top-down, we forecast Nifty earnings growth will recover from 9 per cent in fiscal 2018 to 13 per cent in 2019, but driven largely by financials," the brokerage said in a report. "However, earnings growth is likely to disappoint against consensus forecast of 22 per cent growth for fiscal 2019, implying a 10 per cent cut," it added. Accordingly, the brokerage estimates "no returns from the Nifty in 2018" and has set the index target at 10,500 for this December. The report noted that a sharp earnings recovery, with continued robust macro stability appears priced in by the markets. "A sharp earnings recovery appears priced in. The markets are already close to our 2018 target, given optimistic fiscal 2019 consensus earnings expectations, which build in a strong growth recovery," the report said, adding "alternately, if we factor in realistic growth, the markets are trading at 2-year forward earnings". The brokerage major also noted that despite its "muted market view", the country remains a stock picker's market, more so in this calendar year. "We are overweight private banks, property, oil and gas, telecom, IT services, and auto parts," it said adding it is underweight on cement and industrials/infrastructure. UBS' view on the markets is contrary to other global and domestic brokerages. Deutsche bank has estimated the benchmark index to hit 11,500 levels, while Kotak Securities also sees Nifty at 11,600 by December on back of strong economic and earnings recovery. The benchmark 50-stock index today closed at fresh high of 10,637.

Stocks close at record high for third day

The benchmark BSE Sensex built on gains to close at record high for a third straight session today riding on smart jump in Coal India, Reliance Industries and ITC amid positive leads from global markets. Extending the record run for third day, the 30-share Sensex closed at fresh life high of 34,443.19, eking out gains of 90.40 points, after a choppy trade. The wide-based Nifty of NSE also settled at record high of 10,637, 13.40 points. Opening higher, the Sensex quickly rallied to an all-time intra-day high of 34,488.03. Profit booking in some pharma, capital goods and telecom stocks at record levels, however, pulled the index to a low of 34,343.41 before close. The index has risen by 559.41 points in the previous three straight sessions. Foreign portfolio investors (FPIs) have been supporting the ongoing rally by pumping in sizeable capital, brokers said.

Caution prevailed as crude prices surged to the highest level since 2015. "With indices hitting record peaks on successive days, caution dominated the day's proceedings, especially with midcaps pulling back from day’s peaks. Investors are likely to remain focused on stock specific moves eyeing the prospects of earnings season and mixing and matching various elements of the upcoming union budget."
- Anand James, Chief Market Strategist, Geojit Financial Services

"Sustained foreign inflows and optimism ahead of October-December 2017 earnings and the Union Budget 2018 aided gains."

- Karthikraj Lakshmanan, Senior Fund Manager – Equities,
BNP Paribas Mutual Fund.

- Coal India was the biggest gainer on both Sensex and Nifty components after its board approved a hike in prices of non-coking coal for power and non-power sectors with immediate effect. Coal India rose 5.76 per cent on NSE and 5.63 per cent on BSE, followed by Yes Bank 2.31 per cent.
- Other prominent gainers were Wipro, ITC Ltd, Reliance Industries, Asian Paint, Tata Motors, Infosys, Tata Steel, IndusInd Bank, HDFC Bank and M&M, surging by up to 2.11 per cent. In contrast, Bharti Airtel, Adani Ports, Hero MotoCorp, Sun Pharma, NTPC, Bajaj Auto, Maruti Suzuki, ICICI Bank, SBI, Hind Unilever, L&T, Dr Reddy's, Power Grid, HDFC Ltd, TCS, ONGC and Axis Bank fell by up to 1.18 per cent largely on profit-booking and squeezed the rise in the key indices.


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