Rally on D-Street to continue on better corporate profitability: Kotak's Nilesh Shah

Kotak Mahindra AMC group president and managing director Nilesh Shah said the domestic stock market will continue to rise higher on the back of improved corporate profitability in the long term despite current hiccups from the second wave of the Covid-19 pandemic.

Speaking at an exclusive webinar organised by the Association of National Exchange Members of India (ANMI) on equity market outlook, Shah said the stock market is counting on the trend in corporate profitability, which improved from a low of Rs 32,000 crore in the June quarter last year to an expected Rs 2,10,000 crore for the quarter ended March 2021.

“The stock market is ignoring short-term pain of Covid-19 and looking at long-term corporate profitability,” Shah said. “In the June 2021 quarter, corporate profitability will come down but the market is expecting it to rise after that. Corporate profitability is sustainable.” He added factors such as the government’s vaccination and healthcare improvement drives, lower interest rates and cost control and fiscal stimulus will support the momentum upward in the next six months.

Besides, he expects India’s long-term fundamentals to remain strong as the country has managed to stay on the path of a moderate inflation regime, stabilised fiscal deficit, forex surplus, improved banking scenarios, and availability of physical and digital infrastructure. He picked the home improvement and real estate, industrial, and digitalisation sectors as outperformers in the long run.

ANMI Alternate President Kamlesh Shah said the country was in a very crucial stage where on one hand it is are fighting Covid-19 while on other hand the stock market is at its new peak.

“We are delighted by never before like participation of retail investor,” Kamlesh Shah said. “This reminds me of the theory of Hope Vs Fear. Last year, we were engulfed with fear of Covid and markets slid to a low, but today we have hope in the form of vaccination and pickup in the economy. So eventually we have victory of hope over fear.”