Dear readers, at the outset, here’s wishing you and your family a very happy new year.
2015 has been a mixed year for the Indian stock market. While the key benchmark indices began the calendar year at 27,250 (Sensex) and 8,288 (Nifty) levels, they declined to -5.6% and -4.6% respectively as on 30 December 2015. From the equity fund inflow point of view, domestic institutional investors pumped in over $11 billion in the equity markets while the foreign institutional investors invested roughly $3.1 billion during the year. The government has been extremely active by coming up with a slew of key policy measures like PSU bank reforms, smart city schemes, power sector reforms , Make in India initiative, inflation control, higher FDI limit in defence and insurance, Digital India among others. With smart balancing measures initiated by the RBI Governor Raghuram Rajan in targeting inflation and cutting interest rates periodically, India’s external position and forex reserves grew remarkably. With global economic instability and changes in US Fed rates, FIIs have also added to the volatility and may continue to play truant in 2016. Global survey results on economic condition by McKinsey have identified geopolitical issues to be the greatest risk to growth in the global economy. But respondents are quite upbeat about the Indian economy than other emerging market peers. The GST Bill not being implemented was a negative for the Indian equity market but the government is hopeful that it would be cleared in FY2016-17.After a forgettable CY15, analysts and fund managers expect 2016 to be a better year on expectation of modest economic recovery due to various factors. Market men are also cautiously optimistic and expect the key benchmark indices to be roughly 10% up from the current levels in the next one year. NTPC has high earning visibility since it earns minimum 15.5% costs plus an assured return on equity invested in power business. Additionally, the solar capex investment by the company over the next few years provides long term earnings visibility for safe portfolio investors. It has a secure fuel supply with 90% of its coal requirement being met by Coal India and the rest from imports. As the company has captive mines, with the government allowing commercial mining by public sector units, NTPC is a major beneficiary of this move. Apart from this, the company will be able to sell the surplus coal and reduce dependence on imports. The NTPC stock has been trading in the Rs 135-140 range for some time and deserves a Buy rating with a price target of Rs 168 in twelve months time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.