Mumbai: Indian markets may be swayed by the unfolding political scenario and global cues in the near-term, but the volatility will present an opportunity for portfolio managers to build positions and prepare themselves for the next three-five years, according to a report.
According to an equity market outlook report for December by Kotak Mahindra Asset Management Company, equity will continue to be one of the outperforming assets over the next three-five years.
"In the immediate term, the market is likely to be driven by our political events and also global cues. Whatever volatility that will get presented because of political events would be used to build long-term portfolios," Kotak Mahindra AMC's chief investment officer, Harsha Upadhyaya, told reporters.
The results of the assembly election in Rajasthan, Madhya Pradesh, Chhattisgarh, Telangana and Mizoram, are going to be declared on Tuesday. The general elections are also slated for April-May next year.
"What is critical is the general election rather than state elections," Kotak AMC managing director, Nilesh Shah, said.
Upadhyaya said within equities, mid and small cap segment offers better risk-reward at this point.
In its outlook for 2019, the report has overweighed sectors such as engineering, capital goods, cement, private banks and gas.
"The consumption growth seems to be slowing down a bit and we will a bit cautious there, and also if the valuations are not supportive then we may not want to be an that category," he said.
He added that earnings are showing improvement and downgrades seen in the market are probably behind us.
"In 2019-20, we may not see any further downgrade in earnings," he said.
According to Shah, the tariff war between the US and China, is like a Y2K opportunity for India where we had created a USD 100-billion IT industry.
He said two of the largest buyers of Chinese goods are Amazon and Walmart but both cannot enter China forever.
India has already allowed them entry and if they can be requested to give priority to Indian made goods, the country can catch up on manufacturing, Shah said.
The report further said RBI has become more aggressive on open market operations (OMO) purchases and has conducted Rs 50,000 crore OMO in November, besides announcing Rs 40,000 crore additional support for December.
"They have said that OMO is likely to continue till March 2019. However, it is dependent on the liquidity situation," the report said.
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