The Upcoming Tour of USA and What To Expect From It
Prime Minister Narendra Modi, who is leaving for a seven-day-long visit to the United States, may give a boost to the Indian markets which are trading in a narrow range for the past couple of weeks, say analysts.
Tracking the momentum, analysts are not ruling out the possibility that we may touch fresh record highs during the visit or just ahead of the visit in anticipation of newer partnership in the areas of defence and IT, among others.
Both the Sensex and the Nifty touched record highs on September 8, 2014. While the S&P BSE Sensex' record high is placed at 27354.99 and the life high of the 50-share Nifty index is placed at 8180.20. "Modi's visit to the US will indeed be positive for the Indian markets as trade and investment are likely to take the centre stage in his maiden visit," said A K Prabhakar, Independent Market Expert. "If the Nifty scales above 8162 levels comfortably, then it can touch the levels of around 8400. IT, pharma and defence-related stocks may witness strong momentum during the visit," he added. Narendra Modi's maiden visit would be more focussed on defence and security partnership, energy - including renewable energy - relations, and economic and investment ties along with technology transfers.
The Tour Itenary and the Agenda
Modi leaves for the US on September 25-26 for nearly seven days during which he will give his maiden speech at the UN General Assembly in New York on September 27 and then proceed to Washington for the summit meeting with President Barack Obama on September 30. Benchmark indices have been under some bit of pressure for the last few weeks, but analysts advice investors to remain invested at current levels and look at accumulating quality stocks on every correction. "I would not be an active buyer and use every dip to get into the same stocks and basically I do believe the bull market still very much intact and probably Mr. Modi's US visit will give it another Viagra boost," said Jagdish Malkani, Member, NSE & BSE. IT stocks will be in focus as Modi is also expected to raise concerns over the US Immigration Bill, that will affect the Indian IT industry if passed in the current form. The Border Security, Economic Opportunity, and Immigration Modernization Act (S 744) imposes new and onerous restrictions and higher fees on H-1B and L1 visa programmes on the international IT services sector and would create an uneven playing field, ET reported.
Modi's visit is also expected to iron out bilateral differences over Intellectual Property Rights, particularly in the pharmaceutical industry, official sources report. As per the report, big ticket items for the visit include expansion in the defence partnership to not only launch joint production of equipment, but also sharing perspectives on West Asia and East and Southeast Asia, sources indicated
Long-term outlook remains intact:
The S&P BSE Sensex has rallied over 28 per cent so far in the year 2014, helped by strong support by foreign institutional investors which have already made a net investment of Rs 1.98 lakh crore ($33 billion) into the country's securities market.
Last week, Mark Mobius, Executive Chairman, Templeton EM Group, said in an interview with ET Now that India is now walking on a longer-term bull market and as Modi carries out reforms and becomes more effective in making the changes he would like to make, this will strengthen the capital markets in India.
"India is the second largest of our holdings after China. Thailand is a pie in our Asian funds, but among our global funds, India is right up there along with Brazil," he added. Mobius expects to increase allocations going forward.
With the Fed tapering and ending of QE, crude oil prices are coming down, which is a positive for India. Along with that, GDP has bottomed out and with reduction in interest rates in India, analysts see the markets headed for a massive rally ahead. India has managed to outperform its emerging markets peers with both the Sensex and the Nifty rallying over 28 per cent so far in the year 2014, but the rally is not over yet, said Varun Goel, Head-PMS, Karvy, who expects the Sensex to hit 1,00,000 by 2020. Goel has arrived at a Sensex target of 29,300 based on 16 times FY16 earnings by Diwali and would be buyers at every dip. He also maintains his year 2020 target of 100,000 on the Sensex.
Goel expects earnings growth to accelerate once investment activity is revived and averages at 20-25 per cent for the next several years.
"India is one of the best destinations for US and for other countries as well from investment point of view. If you look at emerging markets, take an example of Turkey or Brazil or China or Russia, among these countries now India appears to be the bestest in Asia, this is one part," said Nilesh Sathe, Director & Chief Executive Officer, LIC Nomura
Mutual Fund.
"On political front, Mr Modi is making all out efforts to reach out to the foreign investors to see that these inflows actually happen and that is a good step which must be appreciated and although India is a good destination, it has to be marketed and that is one thing which in my opinion Mr Modi is rightfully doing," he added. Sathe is expecting a sizable, maybe $40 billion to come to India maybe in other six months from now.
