Credit Suisse in its market outlook for 2017 expressed a lot of pain points for the Indian economy and market going ahead amid significant policy risk and uncertainty. It believes that the momentous changes of 2016 — both local and global — have not played out fully yet.
Slowdown in the real estate (13 per cent of gross domestic product), disruption in the informal economy due to demonetisation, implementation of goods and services tax and stress in the banking system (low credit growth, possible rise in non-performing loans of micro small and medium enterprises) will hurt growth longer than expected.
“Though India specific allocations will continue, I do not see price to earnings multiple expanding. There will be meaning earnings growth downgrades,” said Neelkanth Mishra, managing director and India equity strategist at Credit Suisse.
Credit Suisse likes companies/sectors, which derive business mainly from overseas, like information technology and metals and advises to stay away from domestic driven companies or sectors like cement, discretionary and NBFCs (except housing finance companies).
Since the next 400 companies in the BSE/CNX 500 (barring the first 100 companies) will see pressures due to their domestic focus, Credit Suisse sees narrower indices (example Sensex, Nifty, BSE 100, Nifty 100) would do better than the broader market indices going ahead unlike the past.
HCL Technologies, LIC Housing Finance, Tech Mahindra, Cipla and Tata Motors are its top picks.