Market may give low double-digit returns in 1 year: Macquarie

Mumbai: With earnings momentum likely to improve, Macquarie expects valuation of the Indian markets to sustain. It expects the market to give high single digit to low double digit returns in the next 12 months.

The brokerage said that outlook for earnings in the financial year starting April has considerably improved as impact of demonetisation has been fairly limited.

"We are re-calibrating our top-down earnings forecast for the Nifty for FY18 and FY19 for 16% growth and 17% growth, which is not very different from consensus at this point of time. Private Banks, Autos and IT should be the three largest contributors to earnings in FY18 and FY19," said Macquarie, adding that the impact of Goods and Services Tax implementation is not known yet.

Further transmission of rate cuts will also aid earnings, the brokerage said.

"Despite RBI pausing on the interest rate cut cycle for the time being, we believe there could be another 100-150 bps of transmission as incremental lending moves to MCLR, banks cut deposit rates and banks struggle with low credit demand," the brokerage said in a report.

HDFC Bank, Hero MotoCorp, Larsen & Toubro, Vedanta and ITC are among Macquarie's top large cap picks.

Among midcaps, the brokerage favours stocks such as Dish TV India, Crompton Consumer, Chola Finance, Prestige, Glenmark and NCC.