Market weakness is a correction of pre-Santa rally: Deepak Jasani, HDFC Securities

The market trajectory will depend a lot on outcome of 2019 elections and interest rate scenario in developed markets, says Deepak Jasani, Head of Retail Research, HDFC Securities. As of now, IT services and PSU banks blink on the radar, he told ETNow.

Edited excerpts:

There is no Santa Claus rally this Friday on Dalal Street and Santa Claus was nowhere to be found on Wall Street either overnight. Look at the terrible cues that we had. But the bigger question is, as we head into 2019 what is your outlook for equity markets? Is equity still going to be the good asset class, should retail shareholders stay with it, is it a time to maybe buy blue chips at low price. The reason I am asking you this is 2019 is going to maybe even more volatile than 2018.

We have seen a pre-Santa Claus rally in the sense that last seven or eight sessions, the indices have run up from the lows. From yesterday onwards, we have seen some sort of correction and that correction is of that earlier upmove. We still feel that in the near term, we still have not seen the top. So we may make an attempt to go higher either by the end of December or early January.


But post early January, markets could correct a bit, a little more sharply than what we have seen so far. We will have a lot of issues in terms of global uncertainty because of the global slowdown fears. Q4 last year was very good.

We had a very big base. So Q4 of FY19 may not look so attractive plus around that time we also have the elections here. From say February till May and June, the markets may remain quite volatile with a slight downward bias. Now post that, a lot will depend on the outcome of the elections and how the interest rate scenario is elsewhere in the other developed markets. So in case both of them are favourable, we may see second half of calendar 2019 rally in our markets.

Which are the sectors you think are going to outperform, where is it that you are putting your money?

But prior to, that there may be a lot of volatility. We will have to see as to which sectors go down more sharply from here and then probably bottom fish in those sectors rather than taking a bet from right now to ride on the rally which is expected in the second half of CY19. But as of now I think we like IT services as a sector and we also like PSU banks for the very short term. So these two sectors for the near term we like.

Which are the sectors that one should stay far away from?

So for the next 1-2 quarters, we will like to stay away from auto as a space and except for the trading opportunities that we may keep getting every now and then, metals is another pack because of the global slowdown fears and the situation China is facing currently. In healthcare also, we feel there is some more downside left. Of course, we are not very bearish there at this point of time. For the near term, there may be some downtrend in those stocks and then probably some bottom formation will happen in the healthcare.