The document summarizes the key factors that have contributed to the rise of the Nifty index past 10,000 points and an outlook on its future trajectory. It notes that strong corporate earnings growth, positive macroeconomic conditions in India, and rising domestic investments from mutual funds are likely to support the market going forward. Some risks like a slowdown in reforms or rising NPAs are also mentioned. The document concludes by projecting the Nifty to continue its northward trend over the next year, reaching over 11,800 points by December 2018.

1. What Next After Nifty 10k?
Mr. S.T. Gerela- Chairman
Satco Capital Market Ltd
August 10, 2017

2.  Stock Market is an integral part of an Economy
 If economy does well..
 Corporate sector will witness growth in sales and earnings
 If corporate earning improve..
 It will result in higher EPS
 If EPS of a company goes up..
 Its share price will appreciate
 If share prices in general appreciate..
 It will attract more savings & investment
 Stock market generally discounts forthcoming events
in advance but sometimes not properly

3. Investment Avenue Annualized Returns(%) Returns after adjusting for
for inflation
Equity (Sensex) 16.4% Rs.1 Lakh = Rs.12.63
lakhs
Fixed Deposit 8.39% Rs.1 Lakh = Rs.1.04 lakhs
Gold 11.21% Rs.1 Lakh =Rs.2.49 lakhs
Inflation 7.63% Rs.1 Lakh kept as cash 34
years ago is worth only
Rs.7 thousand today in
terms of purchasing
power

4.  Sensex has grown from 100 in 1978-79 to 32000 on
22nd July 2017 - at CAGR of 16.4%
 Nifty has grown from 1000 in 1996 to 10000 on July
July 2017 - at CAGR of 12.2%
 Equity provides better return compared to other
investment avenues like FDs, MFs, Bonds, Gold etc.
 Equity returns beat Inflation by wide margin
 Taxation on Equities is better than other investment
avenues
 Easy to Liquidate

5.  One of the fastest growing economies
 Largest democracy with stable Government
 Resilient Economy ; 6%+ growth even at the peak of the global crisis
 7.1% in 2016 and 7.4% in 2017
 Opened various sectors for investment
 Comfortable foreign exchange reserves - $393 billion
 Growing contribution from services sector
 Demographic advantage – over 50% people below 21 years
 Thrust on infrastructure development
 Broad consensus on reforms

6.  Growing consumer market
 To be one of the largest consumer market by 2025, worth over
$1,500 bn – CAGR of 7.3% (McKinsey Institute)
 To be 3rd largest economy in the world
 Safe and transparent financial markets
 Vibrant banking and capital markets
 Strong and independent judiciary
 Softening interest rates leaving more head room for further rate
cuts
 Revenue & Fiscal deficits under control
 Increasing FIIs and FDI inflows
 Preferred investment destination

7.  Slow implementation of economic reforms
 Burgeoning NPAs of PSU Banks
 Slow revival of Capex cycle
 Subdued growth of corporate earnings
 Geopolitical Risk

8. 1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
-
2,000
4,000
6,000
8,000
10,000
12,000
21/Apr/96 2/Dec/04 30/Jan/06 11/Dec/06 27/Sep/07 11/Dec/0712/May/14 1/Sep/14 14/Mar/17 25/Jul/17

9.  Policy Paralysis
 Change in government,
 Global financial crisis,
 Brexit
 Demonetization
Therefore, expect Nifty to continue its northward
journey as in the past with minor road blocks on the
way

10.  Victory of BJP with strong majority in 2014
 Narendra Modi perceived to push economic
reforms aggressively
 Supportive global cues and ample domestic &
global liquidity
 Decline in crude oil prices
 Increase in equity investment by domestic
investors
 Government’s continued efforts to push
reforms and liberalize FDI norms

11.  Rationalization of subsidies and direct credit to
beneficiary accounts
 Successful GST rollout
 Decline in inflation rate and hopes of further cuts in
interest rate
 Buoyant foreign exchange reserves
 Good monsoon
 Strong buying from DIIs, FIIs and retail investors

12.  Nifty is trading at PE of 16x on FY19 earnings,
 Which is reasonable
 In the previous peak cycle the PE multiple was about 25x
 MF industry is getting about Rs.15000 crores a month
 i.e., $2.5 billion a month and $30 billion a year
 It is 1% of India’s GDP and 5% of household savings
 Future journey of Nifty likely to be supported by
Domestic inflows
Total AUM of MFs –Rs.20 lakh crores which is roughly 10% of
GDP against global average of 55%
Equity AUMs at Rs.6 lakh crores – account for 3% of GDP as
against global average of 29%
Currently Equity AUMs at33% of total AUMs are expected to
reach 45% in next Five years

13.  Disinvestment Target of Rs.72500 crores in 2017-18 vs.
56500 crores in 2016-17
 25% increase in number of persons filing income tax
returns
 Increase in advance income tax payment by individuals by
42%
 Likely good tax collections under GST
 In top 75 listed companies FIIs hold 27.5% (Rs.25.5 lakh
crores) whereas MFs hold only 5.6%, leaving space for
increased participation from MFs

14.  Current ratio of equity saving to India’s GDP
at 0.7% is expected to double to 1.4% by
2026, resulting in equity saving of $420
billion, which can support the market in a big
way
 In India, 5% of total and 10% of floating MCAP
is held by MFs as against 40% in USA
 Offering scope for MFs to support the market

15. "Elephant walks
slowly
BUT does not walk
backwards”

16. Sectors to gain Sectors in pain
Private Banking Pharmaceuticals
Metal IT
NBFCs Realty
Infra & Capital Goods PSU Banks
Automobile Telecommunication
FMCG
Chemicals

17. 10070
10300
10680
10999
11800
Aug.17 Sep.17 Okt.17 Nov.17 Dez.17 Jän.18 Feb.18 Mär.18 Apr.18 Mai.18 Jun.18 Jul.18 Aug.18