TARGET 50K IN 2020

Pinning its hopes on revival of economic growth, Dalal Street expects the stock market to scale new highs in 2020 with a rally of 12-15 per cent. Experts listing the Union Budget, RBI's rate actions and the US elections as key factors to watch out for in the new year. Going by the performance of benchmark indices, equity markets performed well in 2019 with the Sensex touching a record high of 41,809.96 on December 20. For the year, the benchmark index has gained over 5,000 points (nearly 15%). Market experts attributed this strong show to a host of factors including corporate tax rate cuts, strong institutional flows and expectations of positive outcome from the US-China trade deal. Nifty and Sensex are expected to continue their uptrend in 2020, with some experts forecasting a rise of 12-15 per cent for 2020. Nifty could touch levels of 14,000, while Sensex could cross 47,000 levels, Umesh Mehta, Head of Research, Samco Securities said. On a very conservative note, we can see 13,500 in Nifty and 46,000 in Sensex very soon while the possibility of 15,000 in Nifty and 51,000 in Sensex cannot be ruled out, Gupta added. By December 27, the Sensex has given returns of 15.26 per cent. However, what is making market experts nervous is the frothy valuations. The price-to-earnings (PE) ratio of the 30 Sensex stocks has touched 29, the highest in 20 years. In other words, investors are paying more and more money for every rupee of future earnings of these firms.

Key Factors to watch in New Year

One of the key events that the market would watch out for would be the Union Budget for further cues on policy action from the government to spur economic growth, investments and consumption demand. One of the major factors supporting the market in 2019 were strong institutional flows despite weak economic environment. Hence, institutional flows would be a major factor for deciding market's direction in 2020 as well. Some other key events to watch out for in 2020 would be the RBI rate action, improvement in financial sector's health and the monsoon progress. On the global front, the US election would be a crucial event that could influence market behaviour. Besides further stimulus announcements by the government and progress in the US-China trade talks. Also, the terms of Brexit would decide the future growth in the European economy, Analysts said. A significant correction in the US market can puncture the Indian bull market rally, while hardening of the US treasury yields can also derail the rally. Developments regarding US President Donald Trump's impeachment, inflation and crude oil volatility will also be some key triggers for the equity market next year, Mehta said. On the sectors likely to outperform next year, he said metals, pharmaceuticals, infrastructure, FMCG and consumer durables may witness a turnaround in 2020.

"Sentiments revived post corporate tax rate cut announcement in September. We believe initiatives taken by the government and the Reserve Bank would take time to work on the ground. However, long-term fundamentals of the Indian economy continue to remain strong"

- Siddharth Khemka, Head Retail Research, Motilal Oswal Financial Services

"We expect the economy to improve in FY21 and the market rally is also expected to broaden. In the short-term, markets may consolidate due to current high valuations"

- Vinod Nair, Head of Research, Geojit Financial Services.

"We expect the equity markets to maintain a positive bias as the recent government measures would start reflecting on economic growth. Further, with a positive stance by the US Federal Reserve and easing trade war tensions, we expect global growth to revive, thereby fuelling the rally."

- Ajit Mishra, Religare Broking, VP Research.

"The bullish trend of the last four months may get momentum in 2020. We are expecting a significant recovery in earnings in the second half of 2020 on the back of low base, positive global sentiments and economic reforms that are being taken by the government."

- Amit Gupta, Co-Founder and CEO, TradingBells,

Performance in 2019

Bulls stamped their dominance on Dalal Street in 2019 as equity benchmarks galloped to record highs, shrugging off a raft of sobering datapoints like anaemic growth, global trade tantrums and bubble-territory valuations. Analysts said the divergence between the buyoancy in benchmarks and under-performance in most other segments was one of the highlights of equity markets this year. In another feat achieved in 2019, the Sensex zoomed 1,921 points on September 20, its biggest single-day jump in a decade after the surprise cut in corporate tax rates.

The Sensex started off the year at 36,254.57 and began its steady march upwards. It closed above 39,000 for the first time on April 2, ahead of the first phase of voting for the 2019 general elections, with market participants pricing in a victory for the Narendra Modi-led NDA government. The 30-share gauge actually closed lower after the results were announced on May 23 as investors booked profits, but rebounded soon after to reach the 40,000-points mark on June 3, while the NSE Nifty closed above 12,000.

- Focus then shifted to the first Budget of the Modi 2.0 regime as India Inc clamoured for stimulus measures to revive flagging growth. However, the Budget presented by Finance Minister Nirmala Sitharaman on July 5 came as a bolt from the blue for the bourses. Sitharaman hiked tax surcharge on foreign portfolio investors (FPIs) and high earners, and proposed to raise the public shareholding threshold, fanning fears of oversupply of new papers in an already overbought market. The Sensex tumbled almost 400 points on Budget day, and dived another 793 points when markets opened the next Monday, logging its biggest one-day fall this calendar year. FPIs pressed the panic button and pulled out a net Rs 12,418.73 crore from the Indian equity markets in July, reversing their five-month buying streak.

- Faced with vociferous protests from industry and market stakeholders, the government rolled back the enhanced surcharge in August and also announced a series of steps to prop up the economy. The government then delivered a stunning bonanza to India Inc by slashing corporate tax by almost 10 percentage points -- the biggest reduction in almost three decades. Markets roared back to life and the Sensex rocketed a whopping 1,921 points on September 20, posting its biggest single-day jump in a decade. Buying continued unabated at bourses and the Sensex finished above 41,000 for the first time on November 27.

Small and Midcaps tumble

The stock market appears to have rallied big time in 2019, but the benefits remained limited to a select group of big stocks as the small and mid-cap indices delivered negative returns for the second year in a row as against nearly 15 per cent gains clocked by the two big ones -- Sensex and Nifty. Market participants said the year 2019 belonged to frontline companies and smaller stocks failed to attract investors' interest vis-a-vis their bigger peers. The BSE mid-cap index fell by nearly 3 per cent this year, while losses were even sharper for the small-cap index at about 7 per cent. As a result, the breadth of the market itself remained limited leading to underperformance. According to analysts, smaller stocks are generally bought by local investors, while overseas investors focus on blue-chips. Though the BSE Sensex touched its 52-week low of 35,287.16 on February 19, later with improved sentiment it zoomed to its all-time high of 41,809.96 on December 20. On the same day mid-cap index hit its one year low of 12,914.63 on August 23 and the small-cap touched its 52-week low of 11,950.86. Mid-cap stocks rallied from FY 2013-14 to FY 2017-18. They under-performed in 2019 as mid-cap stocks entered a consolidation phase analysts said. The mid-cap index tracks companies with a market value that is, on an average, one-fifth of bluechips or large firms. Small-cap firms are almost a tenth of that.

"We saw substantial erosion of businesses for small and mid-cap players and therefore the trend is favouring the large-caps. Erosion in business for smaller players has happened predominantly due to demonetisation and introduction of GST also had an adverse impact. There are debt issues in many small and mid-cap companies."

- Amar Ambani, Sr President, YES Securities