Market Outlook 2017 looks encouraging.
The major theme for Indian stock market outlook 2017 would be driven by improvement in consumption demand. This will be supported by implementation of the 7th Pay Commission, fall in interest rates in domestic economy in addition to continued government spending.
The GST Council, the new tax law now awaits implementation in 2017. This simplification of this structure along with reforms pertaining to land, labour and infrastructure sectors could contribute to sustainable growth over the medium term.
De-monetization will impact growth. In FY17, there will be direct impact on the credit offtake and will become worse post demonetization. Volatility in domestic corporate earnings may increase as companies attempt to tide over the impact of currency replacement programme.
Equity Outlook & Strategy
Despite near term earnings outlook weakening post demonetization, levers to support long term earnings recovery continue to remain intact.
Being positive on structural growth and potential domestic flows there is still valuation risk in the market, but it is difficult to call when and how deep the correction will be. Hence, it makes sense to stagger investments.
Suggestion is to hold on to existing investments and incremental investments should be in the form of SIP/STPs.
SIP’s/STP would manage the risks better and reduce volatility of the overall portfolio.
Debt Outlook & Strategy
The fundamental story is still intact given strong domestic parameters i.e. structurally lower inflation, controlled fiscal deficit, higher liquidity and lower credit offtake and expectation of rate cuts. The infusion of fresh deposits in the system (post demonetization) is likely to shore up demand for G-Secs by banks, which could eventually augur well for bond prices.
Short-end of the curve looks attractive (play on liquidity).
Accrual Funds are recommended as a strategy to lock the yields.
Volatility adverse investors could continue to look at investing in long tenor FMPs on account of predictability of returns.
Corporate Bond Funds are available today at higher yields than any other fixed term debt instrument thereby offering exciting opportunity but is recommended for aggressive investors only.