2020 will be a year of consolidation, transition: Aditya Birla Sun Life AMC

Aditya Birla Sun Life AMC Ltd (ABSLAMC) sees 2020 as a year of consolidation as the economy and earnings catch up with valuations.

Corporate earnings, which were depressed earlier, are expected to show reasonably strong growth, ABSLAMC said in its latest ‘Annual Equity Outlook — CY 2020’.

“There are still pockets of value in the market. While headline stocks may continue to remain elevated, catchup could happen in other stocks. We could see a transition from a narrow rally to broader market participation which provides an opportunity in the event of a convergence,” A Balasubramanian, Managing Director & CEO, Aditya Birla Sun Life AMC Ltd, said.

The fund house feels that although returns over a 1-year timeframe could be in high single digits, market can offer reasonable returns to long-term investors as the economy recovers.

Any correction in the market should be bought into while maintaining a balanced asset allocation, according to ABSLAMC. Consumption, banking and financials, pharma and cement are themes of interest for the fund house.

This should sound as music to the ears of several capital market participants, who had undergone significant pain over the last two years. The market has been polarised due to narrow rally limited to a handful of large cap stocks while broader market has not performed.

The key reason for this has been a sharp slowdown in the economy mainly due to the stress in banking/ NBFC/ real estate space and tight liquidity after demonetisation/ GST/ RERA/ NBFC crisis which has specially impacted SMEs and the unorganised segment.

However, the mutual fund house believes that the economy may have bottomed out and should improve gradually.

Cyclical recovery should lead to improved investor sentiment and market is already factoring this in, as is evident from headline indices reaching all-time highs, according to ABSLAMC’s equity outlook.

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